FMSI - Transaction Chart
Community Bank and Credit Union Teller Transaction Data, FMSI

Matt Gunn, Managing Editor | TechComply

The cost of doing business continues to rise, even as the number of teller transactions and physical branches declines. The changing times are causing community banks and credit unions to evolve, according to a new study from financial services management provider, FMSI.

The data in FMSI’s annual Teller Line Study, published late last month, tells the story of new regulation and technology’s impact on bank and credit union branches. In short, the last several years have seen a rise in profits as well as the cost of doing business. A few things are going on there. First, in the last couple decades leading up to the financial crisis, banks were in build mode — that is, they were building branches at a faster rate than the general growth in population. More branches means a lower ratio of customers per branch. And along the way, the number of teller transactions per bank went down. At the same time, the boom in online and mobile banking technology has given more customers more choices in how they interact with their bank or credit union. Finally, another recent development concerns regulation — both on the business (the Dodd-Frank Wall Street Reform and Consumer Protection Act) and on human resources (the Patient Protection and Affordable Care Act), according to the study.

Regulations aside, banks and credit unions are victims of their own success. The market saturation and new technology has done a number on efficiency. With fewer customers per branch and more transactions taking place through self service, the cost per teller transaction rose. It’s led to a bit of painful downsizing since the number of bank and credit union branches peaked in 2009 at 99,550 to where they were at the end of 2012 at 97,337. That’s 2,213 branch closures in only a few short years. Meanwhile, mobile banking continues its meteoric rise. FMSI’s report indicates a 50% growth in U.S. mobile banking usage since 2011. For mobile payments, the value of transactions in that same time period has skyrocketed 62% from $106 billion to $171.5 billion.¬†Times, indeed, are a-changing.¬†

“While mobile banking may not absorb a significant number of transactions away from the branch overnight, it will be a channel we will all have to watch,” states the report. “As the video game generation grows and starts making up the majority of our population, we are sure to see a dramatic shift in consumers’ banking via mobile channels.”

Other technological trends beginning to affect banking are mobile wallets and video tellers, according to the report.

With all of this change highlighted by FMSI’s report (well worth the free download), it calls to light the need for new efficiency, either from a staffing level or in terms of enterprise technology and new services that empower customers to do more on their own. And even though the business is evolving at a steady pace, it doesn’t mean banking is going away. Deposits continue to reach new historic highs each year.

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