Is one-stop banking viable anymore?

Online shopping is taking a huge sales bite out of retail brick-and-mortar stores. The owners of Gap, Old Navy and Banana Republic have reported seven straight quarters of sales declines, Sears is on its last legs and mega-retailer Walmart is scrambling to keep up with Amazon. If legacy retailers are in trouble, can legacy banks be far behind?

So far, the only reason banks haven’t experienced the same dramatic sales decline as retailers is because of the banking industry’s tightly controlled regulatory environment that limits market entry. However, protective policies will only slow down competition; they won’t stop it. Banks must prepare now for what could become significant threats to their bottom lines.

Already, innovative banks and fintech companies are gradually short-circuiting the protective barriers by offering customers cheaper and more convenient purchasing alternatives than what incumbents offer. Bank customers are responding by bypassing their primary institution and going directly to online providers for other products and services. As a result, the concept of a primary bank that satisfies most customer needs is becoming a relic of the past — a transformation that will have serious implications for traditional institutions with revenue models that hinge on selling checking account customers multiple products.

Banks, after all, often lose money on checking accounts; however, the losses have been subsidized by institutions’ success in selling profitable customers lucrative credit cards, automobile loans and commercial products. But increasingly, customers are looking beyond their current bank for cheaper and more convenient financial providers.

According to a 2016 report from Accenture, consumers are purchasing low-margin products from their primary bank but shopping around for higher-margin services. For instance, the majority (61%) of consumers indicated they choose other sources for brokerage accounts, 70% choose other…

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