Diebold Nixdorf CEO: ‘Bank branches are here to stay’

Gerrard Schmid, the CEO and president of Diebold Nixdorf, believes that bank branches are here to stay, despite banks' efforts to cut costs, a push for banks to go digital and recent threats from challenger banks across the pond.

"Branches are here to stay. There is no scenario that I can envision where banks are going to be fully branchless," Schmid said on Monday in speaking to a group of reporters in Las Vegas, where the Ohio-based firm was holding its three-day fintech conference DN Intersect.

While the nature of the branch will continue to evolve, Schmid thinks consumers still need to tangibly touch and see an institution — and talk to actual humans — to develop the level of trust it takes to hand over large sums of money or take out big loans.

"We're seeing a reduction in the footprint size of institutions. Some banks are embedding video capability in the ATM so they can offer conversations with a remote advisor. But all that is still driving towards a physical footprint, but with more embedded IT from a self-service capability," he said.

Along those lines, Schmid doesn’t see challenger banks — recently-created mobile-only banks, such N26 and Monzo, which have become hugely popular in the UK and are slowly making their way into the U.S. — posing a threat to traditional banks either. 

"Everybody is getting excited about the startups that, in theory, are disrupting the financial services landscape. And I want to remind everyone that the industry is much bigger and bolder than the attacker," he pointed out, adding that mobile-only banks have captured a relatively small subset of customers compared to traditional banks, which have cornered the majority of the market.

What's more, mobile-only banks typically only allow for rudimentary transactions — such as a deposit account, debit card and maybe a credit card for the mobile banking — they generally don’t offer more complex transactions, and therein lies the problem.

"Are customers willing to go out and take a $400,000 mortgage sight unseen without speaking to anyone? Are they willing to make it a very complex wealth management investment without speaking to someone? We don't see the world getting there yet," he said. "And if you really want to be a bank, you have to be able to play the entire paradigm of what you're offering."  

That's not to say that mobile-only banks are not having an impact on traditional banks, he said. Brick-and-mortar financial institutions can — and do offer mobile banking — but going fully branchless is another thing.

"I have a hard time seeing that, at least at this stage of what technology can offer," Schmid said. "Maybe down the road when avatars and virtual reality are much more prevalent, but we are a long way away from it."

In light of that, he doesn’t think challenger banks pose that much of a threat to traditional banks. He thinks that incumbents will ultimately win this battle, because they are bigger, have more money and the regulators are on their side. 

Finally, while startups may push the banks to adopt new business models, "the banks have one thing that is very, very difficult for the attackers to displace — they have existing customers," he said. "And if you take a look at the cost of customer acquisition, it is ordinarily high, and therefore, that gives the banks time to respond to a new technology threat, so I always happen to think that the regulation favors the incumbents and not the attackers."