Transcript
Hello everyone, and welcome to another episode of What’s Going On in Banking. I’m your co-host Stacey Bryant, and here, of course, with the esteemed Ron Shevlin.
I practically had to break Ron’s virtual arm because I insisted on kicking off today’s episode.
Why? Because do you see what is happening right now?
I am doing phenomenal.
It has been 53 years, baby. New York City took over.
What an amazing series. Every game had me on the edge of my seat.
Congratulations to the New York Knicks and to every diehard New Yorker who has been waiting for this.
I love an underdog story, and as a New Yorker, the last couple of weeks have been hilarious.
People are saying good morning to one another. They are holding doors. Somebody sneezed and four strangers said, “Bless you.”
Apparently all New York City needed to improve public morale was a Knicks run.
So, Ron, I just wanted to say: I told you so.
How are you doing?
Doing great, and congratulations on your Knicks.
If we were having this conversation decades ago, we would have been completely aligned. I grew up in New York and was a huge Knicks fan back in the days of Willis Reed, Dave DeBusschere, Bill Bradley, Walt Frazier, and Dick Barnett.
That team was incredible.
But after 35 years living in Boston and a very long stretch of suffering through bad Knicks teams, my allegiance shifted.
At some point I realized I could barely name anybody on the Knicks, aside from Isiah Thomas, who was not even playing for them and was mostly busy ruining the organization from the front office.
So yes, I moved on.
But your story makes me think New York would be an incredible place if the Knicks could do this every three years and keep everybody holding doors and saying good morning.
I appreciate that you were one of the first people to text me after they won.
And speaking of the team, I want to shout out Jalen Brunson.
He left a substantial amount of money on the table in his contract so the organization had more flexibility to build around the roster.
Maybe it is a little cliché to connect that to a banking podcast, but I think it is a great example of looking at the bigger system rather than optimizing only for yourself.
All right, enough basketball. Let’s talk banking.
Let’s go back to everybody’s favorite debate: the branch.
I have been pretty vocal about this, but I am not a branch hater.
There are branchophobes who argue that branches are unnecessary, and branchophiles who point to branch-originated applications and deposits as proof that physical locations remain essential.
My response has always been that some of that branch activity exists because the online and digital experience is still poor.
The reason I wanted to revisit this now is JPMorgan Chase’s recent announcement about another major expansion of its branch network.
A lot of people see Chase opening branches and conclude, “See? Physical banking is back.”
I think that misses the strategy.
Chase’s expansion is not primarily about winning more retail checking accounts through branches.
A major part of the play is commercial banking, small business, wealth management, and private banking.
That distinction matters for the community financial institutions listening to us.
Credit unions and community banks often have a stronger retail orientation, and for them I continue to question whether the next incremental dollar should go into another branch.
We have done research on account openings over the last several years.
SoFi alone brought in more new accounts last year than all credit unions combined, and more than all community banks combined, viewed separately.
They did that without branches.
So the question is not whether a branch has value. The question is where the next dollar creates the most value.
And I have a hard time believing the answer for most institutions is another physical location.
That is exactly why I liked your recent Substack piece.
The headline story around Chase sounded like a retail-deposit story, but the underlying numbers tell a different story.
Chase’s business-banking primary share has increased meaningfully since 2019, and the trajectory is steeper than what we are seeing on the retail side.
The branches are not simply storefronts.
Chase is deploying business relationship managers into those markets, building referral relationships with accountants and attorneys, and giving wealth advisors a local home base for pursuing investable assets that still sit outside the bank.
That is much more of a relationship and referral infrastructure strategy than a generic branch strategy.
It is wearing a branch costume.
And the Chime and SoFi examples are useful reminders that institutions should not simply copy the headline behavior of a much larger bank.
There was another statistic that helped push me to write the piece.
One publication wrote that Chase executive Marianne Lake said branches built in expansion markets were already responsible for 40% of the bank’s total retail deposits.
That is simply not accurate.
What she actually said was that branch expansion contributed roughly 40 basis points of new deposit share gains.
That is a very different statement.
Forty percent of total deposits sounds enormous.
Forty basis points of share gain is meaningful, but it is not the same thing.
And this is exactly what happens on LinkedIn and elsewhere. Somebody grabs a statistic, repeats it without checking the underlying statement, and suddenly everybody is making strategic arguments around the wrong number.
That decimal place mattered.
Ready for the next topic?
Let’s do it.
I want to talk about a recent Cornerstone research report on the investment opportunity with what you call “zillennials.”
The first time I read that word, I had to stop and ask what a zillennial was.
You are essentially talking about younger millennials and older Gen Z consumers, correct?
Correct. I got tired of repeatedly writing “Gen Z and millennials,” so I combined them. I am not trying to launch a new generational taxonomy. I was being lazy.
Fair enough.
What interested me more was the idea of the checking account becoming a paycheck motel.
Money arrives through direct deposit, stays briefly, then moves elsewhere for investing, saving, payments, or other financial activity.
The checking account used to be the anchor of the relationship. Increasingly, it can feel more like a layover.
That tells me institutions are not facing only a marketing problem. They have a product problem.
What happens if we rethink the basic checking account?
Could investing become part of the account instead of a separate product somewhere else?
Could a consumer receive a paycheck, pay bills, save, buy traditional investments, and invest in crypto without constantly moving money across disconnected platforms?
That is what I found interesting in the research.
There are several pieces to unpack.
First, I have used the term paycheck motel for more than a decade.
The trend has been developing for a long time.
And one implication is that bank and credit-union executive teams need to reconsider how much direct deposit actually tells them about relationship primacy.
We did research last year showing that direct deposit matters less to younger consumers when they decide which provider they consider primary.
For baby boomers and Gen X, the primary checking provider is often where the paycheck lands.
For younger consumers, the relationship is more fragmented.
The deeper issue is deposit attraction and retention.
For the last several years, I have argued that banks need to reinvent checking.
This particular research expands the idea beyond simply making the checking account itself better.
Investing can become part of the deposit strategy.
That sounds counterintuitive until you look at Robinhood.
Robinhood started with investing and later moved into deposits.
Its original checking-account effort was a mess. In fact, my first Forbes article back in 2019 was about how badly Robinhood had screwed up the launch.
But the company learned and improved.
Today it has billions of dollars in deposits.
Why?
Not because it built the world’s greatest standalone checking account.
It created a more integrated relationship between cash and investing.
Traditional financial institutions have historically built those products in silos. Checking sits in one part of the organization, investments somewhere else, and crypto may not exist at all.
Newer providers are making those boundaries much less visible.
The research also made an important point about crypto.
Younger consumers do not necessarily want a separate crypto-only account.
Many want traditional investments and crypto together.
We constantly talk about consumers having 30, 40, or 50 financial relationships.
That does not mean they enjoy having all those relationships.
Often they have them because no single provider gives them the combination of capabilities they actually want.
The technology to integrate these experiences exists today through third-party providers.
So we wanted the report to hit institutions upside the head a little.
Deposit attraction and retention do not have to come only from changing rates or redesigning the checking account.
A better investment experience can be part of the answer.
And I want to clarify who the real competitors are.
This is not mainly about Merrill Lynch and Vanguard.
The more relevant examples are Robinhood and Coinbase.
Robinhood systematically removed a lot of the barriers that kept younger consumers out of investing: fractional shares, low minimums, a mobile-first experience, IRA matches for certain subscribers, and other features.
Coinbase has used education and incentives to help people get comfortable with crypto.
The lesson for community institutions is not, “Become Robinhood tomorrow.”
It is: identify the friction they removed and combine that with the trust community financial institutions already have.
That is part of becoming a smarter institution through 2030.
I agree, and I need to correct you on one thing.
I absolutely hate the phrase white paper.
At Cornerstone, these are research reports.
I do not let people call them white papers.
Noted. Research report from now on.
Thank you.
The other thing that drives me crazy is when people reduce the younger-consumer problem to marketing language.
I sat through a board presentation last year where a speaker said, “If you want to attract younger customers, you have to speak their language.”
I was sitting there trying not to interrupt because I wanted to say, “That is nonsense.”
The problem is not whether the copy sounds young enough.
The problem is whether the product meets the customer’s needs.
And even “Gen Z” is too broad to be a useful target segment in many cases.
There are strong age-related trends, but there are also huge differences within a generation.
This is fundamentally a product-design issue.
Yet most community banks and credit unions still do not have chief product officers.
You see that role constantly in technology companies. It is much less common in traditional financial institutions.
Somebody needs to own product design, product development, and the product lifecycle.
Marketing cannot solve a product problem with messaging.
That is exactly the point.
Chime took overdraft protection, gave it a better experience, and called it SpotMe.
SoFi is increasingly using language such as “members” even though it is a bank, because it is building a sense of belonging and a broader ecosystem.
These companies are not winning because they found the perfect youth-oriented slogan.
They are rethinking how products work for specific segments.
And Cornerstone’s own What’s Going On in Banking data keeps reinforcing that.
We actually have another research report coming that looks specifically at SoFi.
We surveyed roughly 1,200 SoFi members to understand why they chose the company, what product brought them in, what else they adopted, and how the relationship evolved.
The client who commissioned the research is holding the release for a little while, so we may not be able to talk about it on the very next episode.
But if not the next one, then the one after that. There is a lot to learn from what SoFi is doing.
I’m looking at the clock, and we had one more topic on the list: The Clearing House’s tokenized-deposit network.
That deserves more time than we have left today, so let’s save it for the next episode.
Stacey, thanks as always for being a provocateur and keeping the conversation interesting.
Two final things from me.
First, I saw you on the streets of Boston with your friend and industry colleague Emmanuel Daniel, so just know I have people watching you.
Second, long live the New York Knicks.
Thanks, Stacey.
And thanks to everybody listening. We hope you’ll join us for another episode of What’s Going On in Banking.
If you enjoyed today’s episode, follow us on Spotify, YouTube, Apple Podcasts, or wherever you listen.
Thanks for tuning in.
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