We’re in the midst of a banking accessibility revolution. The number of Americans who bank primarily online grew from 47 percent in 2014 to 62 percent in 2016, according to Bank of America. Numbers are even higher among younger bankers, rising to 70 percent among Gen Xers and 68 percent among Millennials. Meanwhile, more consumers are turning to FinTech alternatives to traditional banking such as PayPal and Venmo, challenging banks and making it likely that banks will begin partnering with FinTech providers to survive, predicts the Forbes Finance Council. Bitcoin is also emerging rapidly as a decentralized challenge to traditional banking.
But banking wasn’t always this accessible. At one time, going to the bank meant making a trip over your lunch hour or getting up early on Saturday. Here’s a look at how banking has become more accessible over the past few decades and how this trend is likely to continue in the future.
In Line at the Teller: The Traditional Banking Experience
Many consumers today raised on smartphones may not have had much or even any experience with a traditional bank. The traditional banking experience can be compared with standing in line at a grocery store. You have to travel to the bank’s location. Depending on the bank’s hours, this may mean making inconvenient adjustments to your schedule. Once you arrive, you may wait in line a couple minutes, 15 minutes, or longer.
This is the traditional banking experience that characterized American banking for many decades. It has advantages, such as the personal touch of speaking to a person face-to-face. But it also has some disadvantages in terms of accessibility, including location, hours of availability and wait time.
Welcome to the Machine: The Rise of ATMs
The traditional banking experience began to change to an automated model with the rise of automated teller machines half a century ago. ATMs were an outgrowth of a trend toward self-service that began in the 1950s with phenomena such as self-serve gas stations, automatic transportation ticket payments and candy vending machines. In 1966, the Japanese introduced the first automated cash machines, which enabled users to receive a cash loan at interest by inserting a credit card. This was followed by the introduction of ATMs in Sweden and Britain in 1967. Early ATMs could only dispense cash, and they had some bugs, so the first deployments were on a small scale. But IBM continued to develop the technology throughout the 1970s, and by the end of the decade, the foundations of widespread ATM use were in place.
ATMs add convenience to the banking experience by allowing users to bank outside of regular banking hours, and by shortening waiting lines. However, they still require a trip to a physical location, and some locations present physical security risks.
The Rise of Online Banking: Today’s Connected Bank
Online banking first began to emerge in the 1980s at major New York City banks which offered home banking to their customers. At first, internet banking was done through landline phone connections to a terminal, keyboard or monitor. In the 1990s, as PC use of the internet grew popular, financial providers began to offer online access to banking services, and some internet-only banks began to emerge. By 2000, 80 percent of U.S. banks were offering online banking services. The mobile revolution of the 2000s led to the rise of smartphone banking apps.
Today, online banking is the most popular form of banking, with 58 percent of Millennials banking using mobile devices such as the iPhone 6s Plus, compared to 56 percent who use desktops and laptops and 38 percent who use traditional tellers and ATMs, according to VocaLink data. Digital channels are now the most popular way to open checking, savings and credit accounts.
Robo-banking: The Next Stage of Banking
As online banking replaces physical banking, traditional banks are adjusting by replacing tellers with automated robo-banks. Bank of America, for example, has opened several mini-banks around the country that have ATMs and videoconferencing but no on-site human employees.
So far, robo-banks are supplementing rather than replacing traditional locations, but that will likely change as banks seek to cut operational costs. Robots are taking over functions of online banking as well, with technology such as interactive voice response providing voice-controlled banking menu options over the phone. As technologies such as these, FinTech, and bitcoin continue to grow in popularity, banking will continue to become more high-tech, accessible and convenient.