Large banks seem to be leading the battle cry to get back to the office. It seems a bit ironic because the history of banking for the past 50 years has been all about remote. And still, while Jamie Dimon is espousing his disdain for remote work, he is actively pushing new initiatives that will improve remote operations and increase automation. From 2017 to 2021, mobile banking has increased from 15.1% to 43.5% and it is only going to go up. In 2022, JPMorgan Chase unveiled a new payment platform specifically for tenants and landlords to eliminate checks. It may take a couple of years, but checks as we know them could be a thing of the past. The Federal Government is probably the last bastion of checks. When that goes, a major function within banks will go with it. It’s just one more domino in the chain that has been falling since the 1960s.
The Automatic Teller Machine and More
This was probably not the most innovative name they could have come up with, but for 1967 the Automatic Teller Machine was a big deal. My mother worked at a bank and I remember it being a newsworthy event when their bank got the first one. Over the years the number of tellers decreased and the number of ATMs increased. Eventually, the bank was sold and the offices with the people were closed, but the ATMs remained.
Credit and debit cards went hand in hand with ATMs. Online banking first made its debut in the 1980s but it wasn’t until the advent of the smartphone that mobile banking became ubiquitous. Banks are offering mobile banking apps that allow customers to perform a range of transactions from their smartphones, including account balance checks, fund transfers, bill payments, and loan applications. These apps use biometric authentication, such as fingerprint or facial recognition, to enhance security. There are very few things that you need to go into a bank for. That’s assuming you can find a bank to go into. Each innovation has allowed for more remote capabilities. At the same time, there are fewer options for office services. Beginning in 2008, the number of bank locations in the United States started going negative and has continued downward. More than 3 bank locations are closing for every new opening. According to the Bureau of Labor Statistics, U.S. banking jobs will be reduced by 40% from its peak to 2025.
21st Century Banking
While most of us like the option to reach a human, we do tend to gravitate more toward automated services. Banks are increasingly using Robotic Process Automation (RPA) to automate repetitive, rule-based processes such as data entry, reconciliation, and reporting. RPA bots can work 24/7, reducing the need for human intervention and improving speed and accuracy. RPA processes can be monitored from anywhere so staff doesn’t need to be in an office to oversee them. This is another opportunity for bank staff to work remotely.
Interactive Voice Response (IVR) has been a mainstay for banks for years. But now with Artificial Intelligence, banks are using chatbots to improve customer service by providing instant responses to common queries and requests. Chatbots use natural language processing (NLP) to understand customer queries and provide relevant responses.
New accounts no longer need a person to set them up. Banks are using digital onboarding to streamline the account opening process and reduce the need for in-person visits. Customers can complete the entire process online, including identity verification, and have their accounts activated within minutes. Again, another remote win for customers. And another reason bank staff doesn’t need to come to an office.
Add in blockchain technology and you have banks building a secure transaction network that can work anywhere on Earth. We will see blockchain technology used for cross-border payments, trade finance, and identity management. No need to go into a bank, or find a notary. The technology will do it for you securely and remotely. So with all this technology focused on remote functionality, why would bank executives be talking negatively about remote work?
Follow the Money
Humans tend to be motivated more by what they will lose than what they will gain. Bank executives are no different. They just have the luxury of sharing their views in the Wall Street Journal, on CNN, etc. U.S. Banks hold roughly 38% of all commercial real estate debt. Most of these are in smaller banks. With the number of loans nearly tripling in the past ten years, vacant real estate means trouble for banks in general.
What’s worse is that no one put the breaks on new construction when they started to see people weren’t coming back to offices. Boston currently has the most exposure with more than 50% more space under construction than even Manhattan. What are we going to do with an additional 125 Million square feet of office space when the current space is underutilized most of the time?
The simple solution is to declare remote work as bad and convince all the other CEOs you’ve lent money to that it’s bad for them as well. Then everyone pours back into the offices, that they don’t want to be in, and the banks view their investments as more stable. What could be simpler?
A Lightbulb Moment
Jamie Dimon and other bankers seem to be going all in on this get workers back to the office strategy, even as they cut thousands of jobs from their ranks. Protecting their investment is the right idea, but it’s inherently flawed. They are asking the wrong question. It’s not a matter of how you get workers back to offices. It’s a matter of what you do with vacant real estate. More workers in offices is only one of the answers. Downsizing is another. Even if they herd people with cattle prods, the numbers will never be what they were pre-covid. The ecosystems that supported offices (coffee shops, bars, convenience stores, etc.) have receded with occupancy declines. Owners, bankers, and developers need to think about a whole new ecosystem for their buildings.
Thankfully, there are plenty of options. We just need to stop thinking of it as office space. Vertical farms, microgrids, and cloud storage are just a few of the profitable growing trends that can replace humans in cubicles. Some of these offices with great views would make great apartments. The new ecosystems of cities are going to be decidedly mixed-use. Today’s office building in the future may have a daycare center, a bakery, a yoga studio, a walk-in clinic, a homeless shelter, a co-working space, Airbnb rentals, community gardens, and maybe even a bank.
