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The branch banking model
- qrian 4y ago> I will note that the United States Postal Service has an employed senior official whose only job is making sure the largest banks in the U.S. don’t go paperless-by-default. This sounds interesting and plausable, but can anyone find a source for it?
- patio11 4y agoCtrl-F for Paul Vogel. https://www.nbcnews.com/id/wbna43259512 https://www.nbcnews.com/id/wbna43259512
- rr888 4y agoYeah I value a few branches around. I'd hate to rely my finances on some startup with an app that could stop working any time. A branch gives some idea of permanence. Maybe its an illusion but I just dont trust virtual only banks.
- metadat 4y agoDefinitely an illusion, banks are about making a buck, or lots of bucks, full-stop. Bankers are the greediest of the greedy of humanity. Don't trust them to look out for your best interests any further than you can throw 'em. Some individual ones might be nice enough people, but the system at large encourages and rewards certain very self-interested behaviors.
- hn_throwaway_99 4y agoI totally understand not wanting to use a "fintech", which is usually not a chartered bank. But Chase, BoA, etc. etc. all have very good mobile apps. I still don't see why you would hardly ever have to go to a branch if you used one of these apps. The right answer, as pointed out clearly in the article, is generational. Older generations normally have much more wealth than younger generations, and that's on top of the fact that millennials have a lot less wealth at this stage of their life than baby boomers did. So the vast majority of wealth held by retail banks is for people who got most of their wealth, and certainly most of their banking experience, before online banking existed. I have a strong sense that once that generation passes that bank branches will go the way of the dodo, or else completely transform into something else (e.g. like what some banks are trying to do with "coffee shop" branches).
- kylehotchkiss 4y agoI did make that mistake and started my adult life banking with the former simple.com. Their actual banking partners were just small local banks in random midwestern places. My grandma got me into Navy Federal and there’s plenty of branches around where I live and I really prefer having a location to stop by with a question
- Cupertino95014 4y agoNo one goes to a physical bank anymore, right? Wrong. If you happen to get to a branch at 8:55 am to use the ATM (assuming they open at 9:00), you'll see a line of people waiting to get in. Are they all just old people who don't know any better? A quick inspection will show that they're not. One reason I've gone to one was to get a bunch of $100 bills to pay for my puppy at a breeder. For some reason, breeders tend to insist on cash. I suppose there are less legal reasons to want $100's, but I wouldn't know about those :) Continuing with "choice of denomination": if you operated a retail business, or you were having a garage sale and you wanted a whole lot of variously sized bills to make change, you might go to the bank. Turning in coins? Lots of stores have coin machines, but they take a commission out if you want cash and not store credit.
- jjtheblunt 4y agoAre breeders illegal around cupertino? I thought everyone was adopting rescue dogs and putting breeders out of business, adopt don't shop and all. i know LOTS of pet families and the impression is based on them...but a few do have breeder bred dogs.
- Cupertino95014 4y agoThey're not illegal anywhere, AFAIK, and you can just go to a dog park, see all the pedigreed dogs, and talk to the owners to know that breeders are doing just fine. There might be licensing rules, and a lot of the owners you'll talk to got their dogs from somewhere in the sticks, maybe for that reason.
- borski 4y agoYour username creeped me out because it’s my city and zip, haha. Had to do a double take
- Cupertino95014 4y agoIf you look on any of the pet websites for breeders, I don't know how many you find actually IN Cupertino. Mine was in Valley Springs (look it up).
- lantry 4y agoI'm curious if this also applies to credit unions. I understand they are structured and regulated slightly differently but it seems like they're subject to a lot of the same pressures. I use credit unions pretty much exclusively and have never done much business with a bank, but it seems like they are mostly the same from an end-user perspective. Is the anecdote about "being ambushed [by a salesperson] upon walking in" a common occurrence? This has luckily never happened for me at any credit union.
- kactus 4y agoI'm curious about this too, as I've only used credit unions and branchless banks. Credit union branches are plastered with loan and mortgage advertising, and the people who handle the loans are salespeople, but I've never been "ambushed" upon walking in.
- alistairSH 4y agoThe only time anything close has happened to me was years ago when I deposited a $40k check into savings. The teller went and got a manger who asked if I wanted to hear about investment options. I declined and that was it. Not an unreasonable question to ask somebody delisting a large sum of money.
- bombcar 4y agoCredit onions have another pressure - they’ve limited things that they can legally “do” with profits and one of the easiest is to reinvest in the branches, etc.
- revskill 4y agoIf not for the purpose of getting the salary, no need to open a bank account for me.
- ghaff 4y agoA lot of people who own houses, pay service people of various kinds, etc. still write checks pretty regularly. There's more acceptance of credit cards and things like Venmo--which I believe have a premium to put on a credit card--but I still write checks for a lot of things in the US.
- ericbarrett 4y agoA lot of the common services in the U.S. that take credit cards charge steep "convenience" fees. I've seen them for property managers (rent), utilities, and even government agencies like property tax collection. I once rented an apartment whose payment processor added an extra flat $35 to credit card charges. No thanks, I'm mailing a check!
- ghaff 4y agoI think my town is like that for various taxes. They farm it out to a third-party, presumably for "free," and the third-party gets their profit by charging a fee of some sort. So I either physically send a check or, for regular payments, I set up check payments through my bank.
- thfuran 4y agoWhat service people don't take credit cards these days?
- ghaff 4y agoTons of them. My housekeeper. My lawn service. I think my furnace service just started taking them. But by no means universal. And, of course, a fair number of people want cash.
- dragontamer 4y agoThe most surprising thing for me was... well... this tweet discussed. https://twitter.com/patio11/status/1181062074316681216 https://twitter.com/patio11/status/1181062074316681216 There's more bank tellers today than ever before, despite the proliferation of ATMs. Strange.
- dan-robertson 4y agoIt surprised me too but I guess the summary is something like ‘banks used to have 500 tellers per atm and now they have about 1.5 tellers per atm. I think that number is a bit surprising still but presumably it isn’t counting ATMs at places that aren’t banks.
- tomcam 4y ago> You can still use a branch manager to achieve an escalation of a routine issue into a bank’s call tree, because they likely have a special number for that, Yeah, not for B of A, at least in the Seattle area. I've had plenty of times when they were holding $1 million of my cash (yes, I'm not the best investor) and getting simple tasks done meant they had to call the exact same numbers I did, getting hung up in the same menu trees. Infuriating.
- simonebrunozzi 4y agoB of A = Bank of America, for the ones that didn't live in the US long enough to know the meaning of it.
- astura 4y agoThey are talking about the branch manager for the branch you're in, not for phone support. Bank of America DOES has a Preferred Rewards program for people with a bit of money with them or Merrell Lynch - https://www.bankofamerica.com/preferred-rewards/ https://www.bankofamerica.com/preferred-rewards/ You have to enroll in it yourself though. I'm the highest tier member ($100,000) and I have "priority member services" under "Preferred Rewards" the bottom of the app when I login. It says I can "speak to a specialist" or "schedule an appointment."
- tomcam 4y agoI’m enrolled. I still end up being dropped out of phone menu tree.
- neilv 4y agoThis article is full of things I didn't know.
- PaulDavisThe1st 4y agoAssuming that all of this is true, I'd like to see a solid explanation of why credit unions, which are not subject to the same incentives as banks, appear to more or less replicate the same idea?
- kochbeck 4y agoThe author could not be more wrong. Branches exist to handle and process A) cash demands, B) check and other non-specie instruments, and C) paper for commercial clients. If they’re a community or specialty bank, branches also exist to serve the particular, unusual needs of their community,—usually business needs. These special needs often include unusual skills such as assessing the quality of a crop or meeting with specialized experts. That branches happen to also offer convenience to consumers is a happy accident, mostly, and it’s happier in that businesspeople are themselves consumers and often select their business bank based on where they personally bank. Branches are JUSTIFIED regulatorily by their public benefit which centers, in most cases, around consumer and SMB (which is to say, prosumer) access. But like many things, the regulatory rationale and the real purpose do not fully correspond. I’m sure you’re as shocked as I. If branches were about sourcing consumer deposits, they would be uninsurable properties, because banks would burn their branches to the ground. Rest assured. Source: I run banks.
- lowkey 4y agoBoth you and the author, while correct about many details, are completely wrong about the business model and economics of retail branch banking. To be precise you are off by 100x or two orders of magnitude on the profitability of depositors to the branch. What you both missed is the biggest open secret in banking - the fractional reserve model. Fractional reserve references the fact that banks don’t merely loan out depositor funds at a 3-5% spread. Instead they are required to keep at most 3% of depositor funds on—hand while they loan out the other 97% at a very profitable spread between interest charged on loans and interest paid to depositors. For this reason every $1000 taken in by a branch allows them to make on average $97,000 in new loans. They pay the depositor 1% in interest on the $1000 deposit while charging 4-7% interest on approximately $97,000 in loans for a rough profit of almost $3,000-$6,000 for every $1000 deposited. Where does the $97,000 come from? It comes in the form of bank credit - literally numbers added in the bank’s computer. This is one of the mechanisms of money creation. The other being sourced by the Federal Reserve when they purchase securities on the open market with money they create out of thin air. This is also what causes inflation, despite what politicians wish you to believe. Banks do not operate as non-profits. They wouldn’t operate retail branches unless the economics warrant it, which they very much do.
- AlbertCory 4y agoBack in the day, Google used to give every employee 10 $100 bills at Christmas. You can probably imagine at least ten good reasons why they stopped, so I won't list them here. Anyhow, I found almost all retail stores would take them. It doesn't surprise me that a bus driver wouldn't -- they don't carry huge amounts of cash.
- awinder 4y ago“‘the mass affluent’; they’re retirees, dual teacher families, software engineers, small business owners, and doctors” Um I think one of these things is not like the other from a cash holdings standpoint.
- Macha 4y agoDual teacher families?
- bombcar 4y agoBased on “millionaire next door” I’m not surprised to see that on the list. Teachers in general seem to live a “less flashy” life than a stereotypical lawyer, and two of them now on pension may have lots of cash laying around - and selling them product could be quite lucrative. Someone’s buying the CDs and overpriced mutual funds.
- patio11 4y agoIn the Chicago area a dual teacher family has income approximating a Google engineer. I'm related to several examples. I know folks think the profession took a vow of poverty, and while they're not compensated in this fashion everywhere, they have excellent PR on that front.
- awinder 4y agoTeachers can max out at a good salary, Chicago looks pretty close to where I live where 25-30 years in you can get up towards 90-100k. An L3 Google engineer looks like they start at 190k. That’s an extreme example but I’m just saying, dual-teacher families are probably not exceeding the median dual-professional household salary, so I don’t understand the callout.
- JJMcJ 4y agoSimilarly in California, especially for the wealthier districts. Maybe even more than in Chicago.
- photochemsyn 4y agoAre we talking about : (a) local credit unions, or (b) those with direct access to the Fed's easy money counter? ?
- enonevets 4y ago> Bank branches exist to sell new accounts. They are sited to maximize new accounts and the value of those accounts. Funny, just recently I was trying to help someone switch banks and we went to 3 different branch locations in an attempt to open a new account. The first didn’t have any reps working that could help open a new account and the other two didn’t have any availability to help with opening a new account and requested we schedule an appointment and come back. We went online to schedule an appointment but the first available slot was at least 2 weeks out.
- ghaff 4y agoA lot of people do need a physical bank branch now and then for various reasons. As the article lightly touches on towards the end however, it's never been totally clear to me why banks need such often large branches in some of the most expensive real estate. I expect at least one explanation in that bank banks think it's important to look very respectable and trustworthy.