Historically, American banking was incredibly restricted—one financial institution, one branch, in one state—coupled with a relatively low cost ($25K to charter a state bank in USA compared to $500K in Canada), causing a swell of financial institutions across the nation.
That is until regulation changed the playing field. The Depository Institution Deregulation and Monetary Control Act of 1980 and The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 increased federal oversight while removing many of the restrictions on opening bank branches across state lines.
With nationwide branching, less individual banks were needed resulting in a landscape of fewer but bigger institutions. Scale became the basis of competition, as evidenced by the top 100 financial institutions growing from 42% of assets under management 25 years ago to an incredible 76% of AUM today.
While regulation was the main catalyst for change historically, the combination of technology and social change suggests we are on the cusp of a new industry inflection point. Billions of digital and connected devices and the effective use of data have accelerated the reduction in branches and ATMs. History shows the result of an inflection point is that the definition of customer satisfaction is redefined and typically market share is redistributed.
How well positioned are you for the data age of banking?