Fast Facts: Student Loans

January 22, 2013
/   Insights

The Financial Services Roundtable recently released another iteration of its Fast Facts, reliable, bullet-point research about issues facing the financial services...

What We’re Reading

May 5, 2011
/   Spotlight

Below are interesting stories the staff has been reading over the past week. What have you been reading? Let...

Out on the campaign trail, Sen Bernie Sanders (D-VT), has fired up support with calls for higher taxes on the wealthy, raising the minimum wage, and breaking up Wall Street conglomerates. Those are explicitly political issues that deserve debate elsewhere, but one proposal of his is certainly worthy of consideration here: turning post offices into banks.

Actually, that’s a subject we explored on this blog nearly two years ago, long before it got attention in the presidential primaries. But in the weeks and months ahead, if the idea gains traction, it might be good to remain aware of the basic challenges and benefits involved.

It’s a potentially odd combination, to be sure. With all due respect to tradition, our business is on the cutting edge, which includes a steady stream of new tools and technologies. The U.S. Post Office, by contrast, exists primarily to deliver snail mail. As we noted earlier, even e-mail is rapidly falling behind other forms of communication via social channels, so a vast infrastructure designed mainly to carry paper around hardly seems like a good match.

And yet. . .

As Sen. Sanders points out, too many low-income people really have no access to conventional banks in their neighborhoods. So they resort to “payday lenders” and check-cashing facilities that sometimes become scams. That’s bad for them, and for the economy. Meanwhile, many of these areas actually do have government-funded post offices with resources to spare.

Now consider the landscape from our perspective. A new study from Business Insider’s BI Intelligence graphically illustrates the erosion in branch banking services. Focusing specifically on that evolving demographic known as millennials, the survey of 1,500 respondents aged 18-34 reveals that nearly three-quarters visit a branch once a month or less.  Fewer than 40% use physical banks to conduct any banking activities other than using an ATM, and only 6% visit a branch on a weekly basis.

In other words, banks aren’t drawing this key demographic, and that’s a bit change. Here’s one indicator of how this shift is playing out. In Britain, a much smaller market than the United States, banks closed 500 branches in the last year alone. That’s more than double the number from 2013, and the damage is far from done: the market is on track for at least 650 closures in 2015. As a result, according to the Campaign for Community Banking Services, 1,500 communities have lost all banks in their town, and more than 800 have only one left.

But there’s a different way to look at all this. In the past we always considered banks to be banks and nothing else, but that notion is being overhauled. We’ve covered here how some banks have become more welcoming with video game machines, community rooms and teller pods, and others that double as cocktail lounges and event spaces. So if banks can become other things, why can’t other things—like, say, the post office—become banks?

Again, we can consider trends developing overseas. On Oct. 22, German financial technology provider Number26 rolled out a new program to turn retail outlets into dual-purpose banking hubs. The plan is to have some 3,000 grocery stores and other familiar retailers throughout Germany offer services to customers who want to make deposits or withdrawals. It’s very much a digital play—to benefit from the service, individuals need to access the Cash26 feature in the Number26 app. But that still means providing a traditional banking service where a bank doesn’t exist.

It’s a safe bet that in the near future we’re going to see many more such innovations. So sure, the very idea of connecting Wall Street with the post office may seem far-fetched now, but as branches continue to disappear and more individuals lose access to regulated and trustworthy institutions, will it seem more viable?

From our perspective, the key question here is which constituency will be driving the change.  Will the government take it upon itself to create partnerships with facilities such as the post office? Or will our industry take the lead and come up with decent alternatives that ensure legitimate banking services to underserved communities?

Chances are, we’ll soon find out.


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Compelling voices and contributed content from around the web

Andy Brown

Andy is marketing director for payments at NCR. He has nearly 30 years' experience in e-payment systems from the delivery and support of systems in the Far East and Europe, from both the product management and marketing perspectives. Based in the UK, Andy is responsible for marketing NCR payment solutions.

Dena Hamilton

Dena is NCR's Director of Enterprise Fraud & Security Software Solutions. She specializes in fraud, risk, compliance and security, with over 35 years of experience in the financial services space. Her focus is the development and deployment of enterprise financial crime solutions optimized in prevention, detection and back office efficiency.

James W. Gabberty

Gabberty is a professor of information systems at Pace University in New York City. An alumnus of the Massachusetts Institute of Technology and New York University Polytechnic Institute, he has served as an expert witness in telecommunication and information security at the federal and state levels and holds numerous certifications from SANS & ISACA.

Neill Harris

Neill Harris is product marketing director for ATM solutions at NCR. He travels extensively to many of the world's leading banks and financial institutions, articulating how self-service technology and innovation can inform and support strategies and solve challenges.

Zachary Ehrlich

25-year-old writer, and as a native San Franciscan, I am unreasonably loyal to Bank of America, if only for their superhero-like origin story, involving the 1906 earthquake and Italian fruit vendors.

Marisa Mann

Marisa Mann brings over 15 years of experience in consulting and financial services industries to the Solstice team, working on large scale enterprise initiatives across many technologies, including specializing in the digital space – Internet and mobile. Mann is passionate about mobile and the endless possibilities for the enterprise, delivering business value through strong brand recognition and driving to excellence in the consumer experience. Prior to Solstice, Mann worked at JP Morgan Chase, Diamond Management and Technology Consultants, Washington Mutual, Inc, and Accenture.

Brad Strothkamp

Cleopatra Mavredis

Cleopatra is NCR’s Global Marketing Manager for Channel Solutions and has more than 20 years of experience in the ATM industry. NCR’s channel solution portfolio is comprised of APTRA Vision, Inetco Insight and OptiSuite solutions.

Edward Wade

Edward is a freelance writer from Sheffield. Now living in London, he focuses on business and finance.