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I often find myself walking through the Sydney CBD analysing different businesses, looking at the once great buildings and brands that have fallen by the wayside and the new ones that have popped up. Is it possible to build a brand in this day and age that will be relevant a hundred years down the track?
I wonder how technology will change what they do, and how in some cases it just can’t.
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The early part of my analysis is easy: work out rent by square metres, outgoings as a rough percentage and variable costs, like wages. The final part is a bit harder: how do you get costs down and revenues up?
The standard answer is to offer better service. Dick Smith once said, “Business is easy, all you do is open up across the street from someone and offer better service”. I’m not sure that’s right, especially in the case of the banks – what’s happening with their branch networks?
Banks take up expensive real estate, always across the road from each other, and they all operate on roughly the same hours and all offer the same services at no fault of their hard-working staff. They lack real direction, training and any sort of entrepreneurial flair.
They should be trying to compete as well, right? How can they? Why wouldn’t you cram well-trained and educated young bankers into their own rent-free business and reward them like their competitors, the mortgage broker? Beats me!
It offers career paths: NAB and Commonwealth Bank just happen to be owners of the largest mortgage broking networks in the world, right?
True story: A young Sydney woman recently went into a CBA branch to apply for her first home loan. She was told she’d need a family guarantee or she should see a broker. She goes to the mortgage broker, gets approved with BankWest, no guarantors, she’s ecstatic, loves the broker and doesn’t even know BankWest is owned by CBA.
Third-party works – you gotta love it! So what d’ya reckon… what does it mean for our world?
Retail banking has become digitised. Cash changes hands less regularly, fewer punters are passing through branches to transact value on a day-to-day basis and BPay has almost brought about the end of the cheque book.
You want a home loan? Call your broker. The proposition just makes sense; look at the cost base for the banks and what the customer gets – a well-trained and regulated professional offering value and choice. Probably on the wrong side of 40, but that’s for another day.
So where does that leave the bank branch?
In the UK, one bank branch has closed every day since 1990.
In the US, transactions in the branch will be down 60 per cent between 2006 and 2015.
More and more we are seeing products sold from shops that are supported by a distribution structure being disrupted by online competitors.
In 1985, the old thermal paper fax machine was going to spell the end for FedEx and UPS. But with the evolution of online shopping and the proliferation of smartphones they’ve never looked back.
So what do I reckon? The bank branch has evolved in many ways since the 1980s, tellers don’t smoke on the job and most of the old city branches house bars and $2 shops these days. But they’re still offering ‘same-same-but-different’; they do have a future and can play a big part in the fabric of bank culture, training and community.
How? That’s for me to know and them to find out.
Troy Phillips, co-founder, MAS
Troy is one of the pioneers in the Australian non-bank mortgage sector. His experience in banking and finance dates back to 1985, first at Australian Mortgage Securities and then at Bank of New Zealand Australia (later HomeSide Lending). In 2003, Troy co-founded MAS, a highly successful wholesale mortgage funding specialist, where he manages sales and distribution.
