Is Online Banking a Wolf at the Door of Brick and Mortar Banks?

Digital banking continues to huff and puff at traditional banks but, for now, these institutions remain a safe and steady fixture in the lives of many.

Many argue that the growing convenience of digital banking is rapidly eliminating the need for brick and mortar banks altogether. They may even go as far as to argue that banking will become completely digital in the very near future. While this argument isn't without merit, there are a number of reasons why the transition is far less imminent than it may seem.

Seniors are only halfway there

If you've ever helped a grandparent learn to use a smartphone or social media, it likely comes as no surprise that seniors are behind younger generations in their internet adoption and usage rates. According to the latest Pew research of seniors and technology use, 58% of seniors go online. But that means more than 40% of seniors don't use the internet at all.

The study highlighted several barriers to technology adoption and usage rates among seniors.

  • Physical. Seniors who identify themselves as having a physical condition or health issue that affects their daily activities are less likely to use the internet.
  • Mental. Many seniors are still skeptical about the value of the internet. Of those who don't go online,  35% don't think they're missing anything important.
  • Learning curve. Some seniors have difficulty with new technology. Many seniors reported that they need assistance using new devices and going online.

All of this evidence supports the theory that, for a large segment of the population, fully digital banking is still a long way off.

Boomers love the internet but still don't trust it for banking

Baby Boomers are on par with younger generations in using online banking. A 2013 retail banking study reported that 71% of baby boomers bank online at least once per week.

But baby boomers differ from their younger counterparts in one significant aspect, their level of trust in the security of online banking.  This finding, published in a Customer Service Profiles (CPS) study, found that 61% of baby boomers believed that their financial data was likely to be compromised in the next three years. Among millennials, only 45 percent shared this fear.

But why should banks care if they've already won over most of the 75.4 million boomers to online banking? Because they're unlikely to convert the remaining 29% — it's a highly skeptical group and one that will be hard to transition to online banking. With nearly a third of boomers believing a security breach is not a matter of if, but when, it's not surprising that many still want to make the trip to the bank.

People still want relationships

Currently, most customers who use digital banking - even exclusively - have a brick and mortar bank that they could visit if they were so inclined. And they do when they need to deposit cash, open an account or conduct complex transactions.

As more and more people trade teller transactions for clicks and drags, some completely digital banks are popping up. Some within the industry see this as a step too far. Among reasons why the naysayers oppose this shift is the fact that lots of people still actually want a relationship with their bank. These individuals like having a trusted confidant in money management to meet with face-to-face, even if they don't take advantage of the opportunity very frequently. They know that having a relationship with their bank is an advantage when they need a loan or other special service.

As technology develops, trends will emerge and antiquated practices will ultimately become extinct. While digital banking is certainly revolutionizing the way many people access and manage their money, it's unlikely to eliminate the need for brick and mortar banks — at least, not for the immediate future.