Will Retail Banks Vanish? Not So Fast

Startup advisor, businesses designer, and capitalist cheerleader Thorsten Linz reminds me of an enthusiastic Dungeons and Dragons player or an excited novice high school debater. Having seen a few data points and, apparently, having hung out with only like-minded entrepreneurial dudes, Linz declared yesterday on LinkedIn that in ten years, all retail banks will shut down and everyone will use mobile apps to bank. Linz bases this prediction on his conversations with other people just like him, including Singularity University founder Pеtеr Diamandis, whom Linz talked to at a finance conference (sounds like a real barn burner). Linz supplements that evidence with the decidedly objective opinion of . . . a mobile banking app designer, Brett King. 

prospect-heights-brooklyn-history-856-washington-ave-capital-one-bank-4.jpgLinz's post spends a lot of time critiquing the designs and spatial constraints of brick-and-mortar bank branches, but zero time on the situation of the un- and under-banked in America, and equally zero time on questions about the role of bank branches in real communities. As a couple of commentators underneath Linz's article point out, many small towns and cities rely on bank branches for cash deposits, and millions of consumers insist on face-to-face interactions with banking professionals for discussions on loans and credit, opening new accounts, providing business services, and so on.

But he's missing the forest for the trees. While it's true that an increasing number of millennials are leaving traditional banking behind, the extent of this exodus has been exaggerated by the very people who stand to benefit from it. Meanwhile, upwards of 100 million people either have no geographical access to, and/or cannot afford, traditional banking and financial services. And, as Linz's readers point out, communities need bank-like buildings.

This is where the proposal for postal banking comes in. The USPS could perform many financial services, including utilizing mobile app technology, but could also provide face-to-face small banking and lending services. In my research into this question, including interviewing the founder of a nonprofit community lending organization, I have found that the face-to-face, bodies-gathered-together component of financial services has not gone away and is unlikely to, since that human interaction is about more than moving money. There is financial consultation and counselling, small business development, and the basic feeling that, when handling something as important as a large financial transaction, sometimes you want to be in the actual, physical presence of your facilitator.

Of course, the ultimate question is whether banks ought to be run by and for private shareholders, or operated as public utilities. Evidence is overwhelming for the latter. This doesn't mean mobile public banking can't replace a lot of on-site banking. But it does mean communities ought to, and eventually will, be in charge of building and maintaining the kind of banking utilities they need. That array of banks will include both electronic and on-the-ground banking facilities.

Linz isn't the first tech-speculator to predict the death of retail banking. He and other glittery entrepreneur dudes remind me of the Pre-Socratic philosopher Thales who, upon seeing water all around him, forgot that other elements existed and declared everything to be water. Trends do not denote irreversible and absolute decimations, and it's possible that a bunch of different, complex things can happen at the same time. I hope the next book Linz reads is Mehrsa Baradaran's How the Other Half Banks. 

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