Bank metamorphosis
for fun and profit

gulf-fritillary-butterfly-1839556_1280 RThe digital age has not rolled forth without casualties. Type-writers, maps, encyclopedias, calculators, film cameras, digital cameras, camcorders, cash registers, books, newspapers, music CDs, and more are found among the metamorphosed, endangered, severely wounded, and just plain gone.

You will doubtless agree that morphing beats going the way of the typewriter. The good news for banks is that morphing in a digital environment represents more than survival. It represents exciting opportunities to prosper in newer and bigger ways.

If a building with a teller line, offices, an ATM and a drive-up is the caterpillar, then the butterfly is a device about the size of a deck of cards, except way thinner, and it rides around in purses and pockets. Some banks are now succeeding as butterflies only, but it doesn’t go both ways: No bank can remain a caterpillar and expect to be around much longer.

Change is never convenient, but this time the benefits outweigh

Share of wallet trends steadily up among digital banking clients. A study by Fiserv showed share of wallet for digital clients compared with branch-only clients at about two-to-one. And that correlated with increased longevity: Bank and credit union branch-only clients dropped off at about twice and thrice, respectively, the rate of mobile banking members.

I need hardly point out (but will anyway) that increased share-of-wallet makes clients less likely to dump you for a competitor. Hopefully that’s due to meeting demand with digital services; but on the more banal side, it can be due to the fact that moving accounts, already a pain, becomes a royal pain when clients also have to install, set up, and learn new apps. “It’s a pain to leave” isn’t quite the same as “my bank has won my affection forever,” but it’s nothing to rue, either.

Longevity aside, you’d hope that greater digital share would correlate with a rise in fee revenue, and that is indeed the case. The above-referenced study showed that mobile users generated 72 percent higher revenues than branch-only customers. Fee interchange fee revenue trended up, too, thanks to a positive correlation between mobile banking use, debit and credit card point-of-sale transactions, ATM use, and ACH transactions.

Meanwhile, apps like Zelle and Popmoney® present new opportunities for banks to generate fee revenue. These apps and others like them come with in-place fees as the norm, and, so far, clients haven’t rebelled. This can help compensate for and may someday overtake market forces making it difficult for banks to charge for bill pay.

I could go on about the growth and revenue opportunities that morphing with the times promise, over and above not ending up on the Digital Age Casualties List. Come to think of it, I have gone on about it, here, here, and here. More than a means of survival, this is a metamorphosis that looks to be as good for banks as it is for bank clients.

I’ll end on a prediction: I bet that soon the financial services industry will talk less about “share of wallet” and more about “digital share.”

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