Coming soon: bank marketing 2.0: technology is not only changing banking, but also modifying the way that financial services is marketed, according to Brett King, author of the recent book, 'Bank 2.0'.

• Author: King, Brett
• Position: Interview

USE OF SMART PHONES IS EXPLODING. More than 90 percent of bank transactions are executed electronically. And, as a result of these things and more, customer behavior is shifting rapidly.

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One of the close observers of these banking trends is Brett King, adviser to some of the world's biggest financial services organizations and best-selling author of the recent book, "Bank 2.0: How Customer Behaviour and Technology Will Change The Future of Financial Services."

King runs a boutique consultancy, called User Strategy, New Orleans, that is focused on improving customer interaction for leading financial services companies and businesses. His clients include such names as HSBC, Citigroup, UBS, TD Ameritrade.

ABA Bank Marketing magazine spoke with King and asked him about some of the patterns he identifies in his book and what they mean for the future of financial institutions and bank marketing. Our questions and his answers follow below.

It would appear that today's branches are quickly becoming outdated. Are they still going to be around in the future?

To a limited extent, branches will remain; however, not as they are today arid most certainly not in anywhere near the numbers they are today.

Banking will be subject to exactly the same shift in distribution models as books, music stores, video rental stores, etc. Whenever you have a product that can be easily digitized and has no requirement for physical distribution, then the distribution model will eventually be compromised.

Despite what many bankers imagine, banking doesn't require a branch. Sure, there are some customers who still prefer a branch experience, but over the last 10 years the percentage of customers who prefer to do their day-to-day banking via a branch has been steadily decreasing. There is no way to arrest that trend.

At some point then, banks will realize they can't afford the branch networks they currently have. If you don't have customers coming to your branches, then you can't sustain the operational model purely on a cost basis.

In the short-term some customers will still start a relationship in a branch because of Know Your Customer (KYC) and compliance processes, but once they've kicked this relationship off, their day-to-day interactions will shift away from the physical network. There's no business case that can justify branch networks based on customers that visit your branch five times in their life.

Give me more details about how you expect that the branch is going to change.

The branches that remain will have to differentiate around service. They will have to provide a level of service that simply isn't possible with a digital interaction.

Using the airlines analogy here, we're not looking for travel agents...