S6 Ep10: BNC: Unpacking the 1 Year Collapsiversary of SVB, Exploring Banking Deserts, and Is This the End of BaaS Innovation(?)
Mar 13, 2024
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Reflecting on the 1st SVB collapsiversary, discussing banking deserts and online banks impact, questioning the future of BaaS innovation with tighter regulations, and tackling Durbin Amendment's effects on convenience stores in North Dakota.
SVB collapsiversary prompts reflection on banking changes, raising concerns about future BaaS innovation.
Branches remain essential for deposit growth, serving as customer acquisition channels in evolving neighborhoods.
Physical branches enhance brand visibility, community engagement, and personalized customer interactions in digital era.
Deep dives
Banks in Branches: The Evolution of Distribution Channels
The trend of bank branches closing continues, although there is a simultaneous trend of strategic investments in new branches by some institutions like PNC and JPMorgan Chase. Despite the digital shift, branches still play a critical role in customer interactions, with Bank of America noting 600,000 daily branch visits. This paradoxical trend of branch closures alongside new investments suggests a complex and evolving role for branches in banking.
Branches' Impact on Banking Deserts and Access to Banking Services
While branches are closing, studies show a rise in banking deserts and decreased access to essential banking services, particularly in rural communities. Investments in branches, like those planned by JPMorgan Chase and PNC, may address these access issues and maintain a physical presence for customers. The correlation between branch share and deposit share indicates the continued significance of branches in banking operations.
Branches' Role in Retail and Small Business Account Acquisition
For traditional retail deposits and small business relationships, branches remain essential due to historical correlations between branch presence and deposit size. Branches serve as critical acquisition channels for stable, insured, and sticky retail deposits. In expanding or developing neighborhoods, new branches can drive deposit growth by leveraging physical presence and local visibility as customer acquisition tools.
Branches as Community Billboards and Customer Acquisition Tools
Branches serve as physical touchpoints and community landmarks that enhance brand visibility and customer engagement. In new or evolving neighborhoods, branches can act as community billboards drawing in customers and promoting banking services. While online account opening is prevalent, physical branches offer a unique customer acquisition strategy through local presence and community engagement.
Branches as Customer Acquisition Tools and Brand Ambassadors
Despite the digital shift, branches continue to serve as customer acquisition tools and brand ambassadors through physical presence, community engagement, and personalized customer interactions. Scaling deposits through retail and small business relationships often relies on the local visibility and trust established by branch networks. Strategic branch investments align with community development and customer acquisition objectives in evolving market landscapes.
Bank Branches and Financial Accessibility in Rural Communities
The podcast episode discusses the importance of physical bank branches and their impact on financial accessibility, particularly in rural communities. It delves into the concept of banking deserts created when branches close in certain areas, despite the availability of internet banking services. The episode highlights the significance of physical interactions in financial education, especially for children, and raises questions about the necessity of branches for fostering economic activity and community development.
Congressional Involvement in Bank Mergers and Regulatory Processes
Another key focus of the podcast episode is the commentary on the involvement of Congress members in bank mergers and regulatory decisions. It criticizes elected officials for publicly expressing opinions on bank mergers without proposing legislative changes. The episode emphasizes the role of Congress in setting financial regulations, questioning the effectiveness of sideline commentary on regulatory processes. It underlines the need for elected officials to understand their role in creating the regulatory framework that influences bank behaviors and mergers.
Just because Alex is finally leaving Las Vegas, doesn’t mean he’s escaping the banking desert back in Montana. And for that matter, neither are the vast majority of Americans. This week, he and Bank Director Editor Kiah Haslett discuss the growing impact that closing bank branches have had on rural communities— what are these “banking deserts”? And what really happens when online banks are all that’s left in a town?
Also… Did you forget whose anniversary it is today? Happy 1st SVB collapsiversary! Alex and Kiah reflect upon the landmark news story that brought “Fintech Takes” into the limelight. How have things in banking changed since SVB first announced its failure? More importantly—have they changed since its collapse?
Plus, with BaaS regulators cracking down, what happens when people with new ideas can’t meet the minimum barriers to entry in BaaS anymore? Are we witnessing the death of BaaS innovation? Alex and Kiah discuss what tighter regulations could mean for the future of the BaaS market.
And stay tuned as later Kiah and Alex tackle the convenience store in North Dakota who claims the Durbin Amendment is harming them and Kiah unleashes some harsh truths that Congressional leaders need to hear.
00:04:35 - Kiah’s Bank Director Report on Generative AI
00:06:52 - Happy SVB Failure Day!
00:21:51 - BaaS’s Evolution
00:39:20 - Capital One vs. Discover Quick Take
00:41:00 - Corner Post vs. the Federal Reserve Board
00:45:41 - An Unanswerable Question
01:14:44 - Go Off Kiah!
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