The “Big Four” vs credit unions – a David and Goliath story

by: Austin Wentzlaff

In my most recent blog post, “A Lesson from Amazon & Uber: How to Transform Data into Your Most Valuable Asset”, I discuss the ways in which data is changing how we interact with retail institutions.  Rather than interacting with a physical, brick-and-mortar location, we now see retailers such as Amazon championing a more online/mobile approach.  The reason for this fundamental shift is the growing realization that data is the most valuable asset a company possesses.  It provides valuable insights into customer behavior at a much lower cost than physical expansion, resulting in a higher return on investment (ROI) for the company.

Big Data and Mobile Banking

As mobile banking continues to gain traction, data is generated at an alarming rate.  By leveraging Big Data/Analytics, this data will give retail banking institutions powerful insights into their members, allowing them to create relationships without the need for physical interactions.  As this happens, people will start visiting their physical branch less (much like people are doing with other retail institutions…think Amazon vs Borders Books).  A decrease in need for physical branches will require financial institutions to close down unprofitable, obsolete branches.  The resulting process is incredibly costly and is often accompanied by public or governmental backlash.

“…despite the estimate that as many as 25 to 30 percent of branches are unprofitable, many banks are holding on to branches because of expensive, long-term leases or because past renovations have not been fully depreciated. In addition, it is estimated that the cost of closing a branch is as much as $500,000.”  — Jim Marous, Banks Can’t Close Branches Fast Enough

 

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