We tweeted out an interesting statistic today from the Journal of Financial Planning that reinforces the sea change that is building from the use of technology.
Cash… 57% of Americans never carry cash, relying on credit and debit cards for daily expenses.
— LANDMARK FINANCIAL (@LandmarkFin) July 11, 2014
We all recognize how robotics and technology has radically changed the manufacturing industry allowing productivity to rise, which is a main driver for companies coming back to US soil, but the banking industry has been slowly changing as well.
I grew up in a world of cash & writing checks, but that has now evolved into the use of plastic and the bill pay system. When we opened up accounts for our kids they didn’t want checks, and don’t carry cash. In addition, our whole family rarely will step foot into a bank branch as we make all of our deposits using our mobile phone. These changes will radically change this industry over time leaving three major outcomes:
- Profitability – Technology adoption by banking clients will allow for increased profits. It’s less expense to process a digital charge than a check. It may also speed up consolidation as the companies that embrace the digital age can gain a competitive advantage over their peers.
- Job Losses – Banks won’t need as many people as the machines can replace the need for the large operational staff. In addition, less foot traffic in bank branches will mean less tellers and staffing needed in the branch. Do banking hours change?
- Real Estate – Smarter ATMs and mobile phones may replace the need for branches. Drive around town and look at the number of bank offices/branches in town. Over the next 10 to 15 years I would wager lots of them will go dark, as the need for that delivery channel goes away.
Rambling a bit this morning… in summary, technology is here to stay and should be a core holding in your investment portfolios, but it does come with some costs.