Introduction: Why This Conversation Matters

HOST (Brett King): Welcome back to Breaking Banks. Today, I’m joined by Jim Marous to explore how the financial services industry is undergoing a seismic shift, from AI-driven innovation to evolving trust frameworks and the systemic reconfiguration of banking as we know it.

What Forces Are Driving Change in Financial Services?

HOST: Jim, when you look at today’s financial landscape, what stands out as the most disruptive forces?

GUEST (Jim Marous): Several trends are converging:

• AI adoption is rapidly transforming operations and customer engagement.
  
• Geographic boundaries are dissolving, creating global competition.
  
• Regulatory frameworks are lagging behind innovation.
  
• Trust and transparency are emerging as critical differentiators.
  

QUOTE: “It’s not just about speed. It’s about creating entirely new systems of value and control.” – Jim Marous

How Is AI Changing the Role of Banks?

HOST: Many argue AI is about efficiency. Is that the real story?

GUEST (Jim Marous): Efficiency is only the surface. AI’s real value is systemic:

• It identifies hidden data patterns that reshape decision-making.
  
• It enables coordination without consensus, allowing fragmented players to align without formal agreements.
  
• It translates legacy business logic into explicit, governable frameworks.
  

QUOTE: “The winners in banking won’t just automate tasks; they’ll orchestrate ecosystems.” – Jim Marous

What Does Trust Mean in the Digital Era?

HOST: Trust has always been central to banking. How does AI redefine it?

GUEST (Jim Marous): Trust now means more than financial solvency:

• Transparency: Explaining how algorithms make decisions.
  
• Inclusion: Designing systems that serve all demographics.
  
• Resilience: Ensuring AI doesn’t create fragile systemic dependencies.
  

QUOTE: “Trust in the AI era will depend on transparency and resilience, not just capital strength.” – Jim Marous

Where Are the New Opportunities Emerging?

HOST: Looking forward, where should leaders and innovators focus?

GUEST (Jim Marous):

• Follow the constraint—because that’s where new value will be created.
  
• Invest in AI orchestration layers instead of fragmented point solutions.
  
• Develop human-centered skills like creativity, collaboration, and systemic thinking.
  

QUOTE: “High-value roles will emerge where constraints shift, not where tasks disappear.” – Jim Marous

Key Takeaways

• AI reshapes systems, not just tasks.
  
• Data orchestration and governance are the new competitive edge.
  
• Trust must be redefined for transparency, inclusion, and resilience.
  
• Future skills lie in managing complexity, creativity, and collaboration.
  

Guest Bio

Jim Marous is one of the most recognized voices in banking and fintech, an influential industry analyst, author, and speaker. He has helped banks, credit unions, and financial institutions worldwide understand the impact of emerging technologies, regulation, and consumer expectations on the future of finance.

Raw Transcript:

Geez, if one closes, do all the people go to another branch or they stay with that branch, you know? And are you the last one that’s going to be selected for new accounts when they don’t see the branch among five others? Unfortunately, or whatever way we want to look at it, the consumer is so accustomed to seeing that, you know? Yes, guess what? Instacart could deliver every one of my groceries probably better than I shop, but I don’t want my grocery store to close. Welcome back to Breaking Banks and our special series on the new book Branch Tomorrow. I’m here with my co-author, contributing author Jim Maroos, a frequent guest on Breaking Banks over the years.

In fact, the first time he ever hosted a podcast was on Breaking Banks and we’ve often referenced it last week. So Jim, welcome back to the show. How have you been, bro? You know, I’m doing good.

You know what’s really good? I’ve tried to take it easy over the summer and try to read some books and I don’t know if you’ve seen this, there’s a new book out that it’s a bestseller. It is already a bestseller, number one in banking. Cover to cover, three times.

I can’t get enough. Awesome. Well, thanks for the feedback, you know.

Do you find it weird reading your own words in a book like that? You know, the first time, I mean, I go back and read some of my books, like Bank 4, I’ve read a couple of times just to keep fresh the ideas, you know, because I get question on it and also augmented and I enjoy it. Yeah, the differences that you showed in the book with the different co-authors around different regions, I think it is interesting, but it was interesting because even though you shared the PDF version of the book, we tend to focus on our section and I haven’t, I’m now reading the rest of the book and it’s interesting the dynamics of the different areas, the challenges, organization feelings, just kind of cool. Yeah, well, you know, first of all, thank you for your contribution to the book and it’s great to be able to do a project with my friends, you know, that are all in the FinTech base.

A group of friends, you know, we all kind of knew each other, so it’s pretty cool. Yeah, so collaborators, so it’s great. Now, of course, you contributed to one of the more significant chapters of the book, which is the chapter on U.S. branch decline and, you know, we know, of course, that branches have been in decline since 2008 in the United States.

That decline sped up a little bit during the pandemic, then it slowed a little bit in 2022 as some of that activity came back, but on average now we’re seeing sort of that, you know, two to four percent decline annually in terms of branch numbers. And yet, you know, I mean, I’ve done an event, I did an event in Austin, Texas not that long ago for America’s credit unions and, you know, I’ve done other events in the region recently where there’s still very much a belief that branches still have a role to play and, you know, and of course we can start with one of the debates that we had in the book and I wouldn’t say that you and I debated this, but there was, you know, there is a debate going on in the United States right now in respect to some players who are still investing in branches, you know, players like Chase and Wells and so forth, but globally these are outliers and even in the interview I did with Effie the other day, Effie referred to Chase as an example of banks still investing in the branch. Here’s the key problem I face with that though and, you know, this is what I want to discuss is I don’t know how the economics of that even work today, let alone in the future, you know, Chase is, you know, pay somewhere between $350 and $450 US to acquire a customer through their branch network today, whereas NewBank is doing five to seven dollars, WeBank a dollar, you know, so the real problem with traditional bank architecture is that it can’t scale in a digital world and the economics, most branches are now no longer profitable, you know, I would say my estimate would be that, and it’s hard to find out the math behind this, but my estimate would be 60 to 70 percent of branches in the United States today are loss-making entities and in that environment, when you’ve got digital… I don’t think there should be an argument for that, yeah, yeah, right, yeah, go ahead.

Yeah, so then where does it go from here, you know, is these movers who are still investing in branches, is it that they’re adding branch numbers or are they just, you know, are they just resizing their network, you know, right-sizing it by taking larger branches and building smaller sort of footprint, you know, what’s the reality in terms of the mechanics, because I don’t know how it’s sustainable, you know, with those economics at play. They’re not smaller branches, at least the ones that have been built in our area, the new Chase branches, the new Bank of America branches and the new Wells Fargo branches are not small branches, they’re, I mean, in Chase’s brands, they’re standalone, they’re not even in a center or anything like that. I think what’s interesting is in most of those cases, including Capital One, I think they’re right-sizing the network.

I think we’ve seen recently, especially that the Chase, the Bank of America, the Wells are in many cases are in a net negative position. They’re simply opening branches in areas where they’re not and closing where they’re in areas where they’re overly saturated. And I continue to look at the fact that where… So they’re reporting on the branches they’re opening, but they’re not reporting on the branches they’re closing.

It’s a PR exercise, right? Oh, exactly right, because it’s not a feel-good moment, you know, in right-sizing. What’s interesting too, and this is the one that baffles me, Brad, in the same category that you mentioned, the big banks, it’s just small banks. We did research this year that I referenced in the book, that there are more organizations that we researched that said they’re going to be adding a branch than subtracting a branch.

That is baffling to me. We’re not talking about the Chase. We’re not talking about the Wells Fargo in these cases.

We’re talking about small and mid-size organizations that I think their intention, the best they can reference it is, we want to generate more deposits. I can tell you that there’s not a soul that I know that thinks that generating deposits can be done more efficiently with a branch. Now, to your reference on Chase, they’re also getting to pay that amount.

You’re having to open up several accounts. They’re also targeting very closely who they’re going after because of their credit card base. They benefit, Bank of America benefits, Cap One benefits, because their credit card market, they can send her into wealthier areas and then try to get their credit card customers.

I can’t justify. I have a hard time justifying. Anybody that says they want to expand their market share via a branch network, it’s at $1 million to $2 million a unit.

That’s the thing. What’s going to be the most economical branch footprint, like a pop-up branch is still going to be hundreds of thousands of dollars. They’re trying to bring the new things together, say, we’re going to do this mini-branch, but then I’m saying, okay, but why are so many people then saying they want a consultancy center? You can’t either have an oversized ATM or you have an undersized consulting center.

I’ll tell you that, as you said, the economics don’t work from a dollar and cent basis, or at least put it this way, it’s not the most optimal. I’ll take that weak middle spot that says it’s not optimization of money. Hey, look what Chase is doing.

They’re not only one of the fastest growing banks, if not the fastest in the UK, they’ve now announced they’re going to be moving to Germany. But they don’t have branches, not a digital acquisition, which is interesting because you’ve got to then make that argument is, do they believe in branches for sustainable purposes? Well, why aren’t they deploying branches in Germany, in the UK, instead of a digital acquisition? It’s because they couldn’t afford to do that. They’ve grown impressively.

What is it? They’re up to 5 million customers in the UK now, I think, something like that. At the same time, they’ve to spend a lot more money than Monzo or Revolut in the UK market to get that traction. Their economics are still not great.

You can’t do it without scale. That’s the point. That’s really at the core of why we did this book, is the scalability question.

That being said, Chase is totally digital in Europe. They’re very branch-based in the States. Is this an issue of the banks’ mentality? Or is it a consumer issue? Consumers will react very quickly with that push of the button, if you take a branch out of their favorite spot on the street and make me go to the one that’s further, that I don’t go to often.

No, mind you, I may only go to the branch twice a year, if that. If that. But to go further, and when I go, you know what, I go past this other branch all the time, I’ll push a button.

It’s interesting. I think it’s a very risky position. Well, having spoken to heads of digital at one of the brands we’ve talked about today already, and another mid-sized, very large bank in the top 10, and they’re telling me that 60% plus of their customers have not visited a branch in the last 12 months.

Now, this I’m sure doesn’t surprise you, but here’s the problem. If you do a customer survey and you ask customers, what leads you to a choice of bank, often one of the top responses is a branch near my home or my work. And yet, those survey results are not translating into footfall today because the utility of digital is becoming so good.

And look, honestly, Chase is very good at digital as well. They’re spending $18 billion a year on transformation right now, so they have to be. But they’ve got a large percentage of deposits and account opening that’s coming through digital now.

It must be at half of their new customer engagements now must be via digital. I know for TD in the US, it’s much higher. Their largest cost center in terms of customer acquisition is digital for TD now.

So we are seeing that- Bank of America with Erica, what a great runway that’s given them on the digital platform and when you start looking at search and everything else. So the reality is, it seems customer behavior is already shifting in reality, but the perception of customers in the US is still that, I need a branch just in case I need to go and yell at someone to get access to my money or if there’s a problem. Because they’re everywhere.

I mean, a center city, which is a small suburban country, there’s four branches, five branches of different financial institutions on the street. Jeez, if one closes, do all the people go to another branch or do they stay with that branch? And are you the last one that’s going to be selected for new accounts when they don’t see the branch among five others? Unfortunately, or whatever way we want to look at, the consumer is so accustomed to seeing that. Yes, guess what? Instacart could deliver every one of my groceries probably better than I shop, but I don’t want my grocery store to close.

Drugstores. That’s a great point. That’s a great point.

These behaviors are sticky. One of the other thing is there is a bit of the US market sort of closed loop thinking here. One illustration of that that I use is that if you look at most of the other G20 markets, certainly if you look at China, if you look at European markets, for Gen Zs and Alphas, 80% of their banking is done first and foremost through a wallet and an app these days.

They don’t even use a plastic card. Most of them have never carried a debit card. They certainly don’t use cash.

They don’t even know what a check is. Whereas in the US, adoption of contactless is well behind. UK is like 90% contactless.

China is like 98% digital now. It’ll be the first real cashless economy in the world. US is still, I think, at about 35%, 40% of contactless now.

It’s insane. Even instant pay. Everything that’s going on in an instant way, I was amazed by the silent lack of taking up on that technology.

People are still- So Americans are proud of that, though. When you talk about this and you talk about what’s happening in these other markets, Americans are proud of the fact that they can still do it the old fashioned way and can still write a check. What is it? 80% of checks globally are in the United States today.

I don’t know how- As you know, I write checks twice a month and that’s because I have to write a check to myself to transfer funds because the financial institution that’s the origin bank doesn’t talk to the accepting bank. You write yourself a check, do a remote check deposit capture and your good money goes. Instead of just doing an instant transfer.

It’s insane. It’s insane. That’s me.

The point, though, you’re saying, and I think we have to keep on drilling home is just because it may be difficult to close branches, there’s no justification to open branches. If you need deposits, the hardest way to do it is in a branch-based environment. Absolutely.

The easiest way to do it at a whole lot less cost is to number one, fix your back office so that when you open an account, it can be open almost instantly. You can’t have a 13-minute process because you’re going to lose from our research, 60% to 65% of the business that would have come to your financial institution won’t if the process takes more, if they have to do it outside of a phone. They want to do it with a few clicks and it’s not hard to do.

You just got to do things when you do that, and you start going after some digital marketing, you’ll increase your deposit growth, you’ll more than triple it. It’s going to happen. Don’t build a branch.

Now, as you said, we debated in the US section, because what do we do with all the monstrosities everywhere else? Number one, don’t take your lead from the biggest banks. They have a completely different metric than we know how to work with. I doubt if Chase is losing money.

They’re happy to have all of these empty branch billboards around the place to build trust. But on the other hand, think about your allocation of where you need money to be spent, and it’s not in a physical structure. There’s just no way out.

I can justify it. I know you’ve talked to Ron Shevlin, every one of the people who contributed the book. No one can make a case for why you have to do it.

Shout out to Ron Shevlin. When are you going to interview Jim and I on the new book, brother? Damn it. Good girl.

That’s all good. Look, Jim, I’m conscious of the time, but let’s talk about some of the mechanics here. You do a lot of advisory work in the space.

You’re speaking at events all around the world, of course, about Banking Transformed. How do we change the culture within the US? I think some of it is regulatory, like the Community Reinvestment Act and some of these constraints that exist. How do we change that culture so branches aren’t seen as the primary channel anymore? The reality is you’re going to get 99.9% more interactions digitally with your brand today than you ever will with a human face-to-face interaction.

How do we change that culture so it’s reflected in terms of investment and reshaping the banking market in the US? I believe from what I’ve seen recently, there are more organizations trying to fix their back office so they can take accounts on digitally in a seamless way. This is all going to get to a point here where they’re going to make it a three-minute new checking account opening, but then immediate for a loan, immediate for a savings account, where you’re not going to have to re-input new documents. That is an extraordinarily major focus across the industry right now.

When that happens, and when they’ve made it so that almost any organization can open an account on a phone, all of a sudden, we’re going to see the traffic that currently exists at branches, at drive-thrus, even at ATMs, you’re going to see it go down significantly because the way you paid for those branches was not the ATM transactions, it’s the new account openings. If people can do it digitally, the reason why people come in the branch now is we’ve forced them there because you make it so hard to do the basics. Again, when you start taking away the numbers for why you have to have that branch there, when all of a sudden your new account openings are twice or three times higher digitally than they are in a branch, they aren’t now because there’s been no momentum in the culture to change the old way of doing things.

Organizations don’t understand the business they’re not getting because people aren’t opening accounts there, they’re opening them at Chime, they’re opening at SoFi. Oh, by the way, take a look at SoFi and their numbers right now. They’re doing better than ever from the standpoint of shifting to more of a bank platform instead of a rocket mortgage.

Be aware that these organizations, Ally, will continually build their customer base with customers that are frustrated in the old mechanics of the branch-based model. Now, I’m using it- To that point where if a customer says, I mean, a bank says, oh, you’ve got to come in and do a KYC or sign a piece of paper in the branch, then these millennials and these Gen Zs are going to be, I forget that, I’ll go to Chime. There is a behavioral differentiation.

Baby boomers. The baby boomers, myself, yourself, the reality is- I’m a Gen X, bro. We may not have closed any accounts, but we pushed for a new relationship.

Exactly. I’m actually in the process of closing a banking relationship right now that I’ve had for 18 years, and I never thought I would close it. I resisted it, but I’m closing it just because it’s been so difficult recently from a compliance perspective to keep them happy.

I’m just going to go full digital now. There will still be branches in the US as long as both of us are living. Their purpose will change.

Their numbers will continue to change. I think I will agree with you. I understand the rationale of some of these big financial institutions, but the reality is I can’t support 99.98%, maybe, percent of the financial institutions for the rationale for building branches.

I’ve learned not to challenge Chase and Jamie very often because it usually ends up being fruitless. They’ll figure it out, but once it gets- 30 floors of branch-based people in their New York headquarters that they’re going, geez, how do we tell them that we want to unwind those branches? At some point, it’s going to have to happen. Chime just crossed 40 million customers, US Bank has 19 million.

Look, I’ve often said this, we know who’s going to be the biggest bank in Latin America in 10 years because it’s then today, it’s New Bank. They’ve got twice the customer base of their nearest traditional competitor. Revolut is going to be the largest bank in Europe this decade.

WeBank will be the largest bank in China this decade. We see this happening all over. To think that the US is going to be immune from this, despite a fairly aggressive regulatory environment against digital players.

We don’t have a fintech charter in the US. It’s the only G20 country without a fintech charter. It’s really tough for players like Varo and Chime and others, but they’re still breaking through because of the economics.

Let’s talk about- Sorry, go ahead. We make excuses, Brett. The bank is making excuses.

Well, yeah, Chime’s got all those customers, but they’re not making money on the customers. Guess what, guys? That was because they were younger. Take a look at their revenue per customer and how it’s increased year after year after year.

Look what SoFi has done. Look what Varo has done. Why? Because part of the whole idea of making your primary finances is to kick the tires for multiple years.

This is a financial relationship. It’s not like you’re buying a used car. The reality is, when the people get more and more comfortable, all of a sudden, they’re going to go, you know what? They want my business a whole lot more than my current bank does.

Ally comes to me all the time with new offers that are better than the last. I’m going, eventually, I’m going to give in because they want my business more. Digital organizations can do that because they don’t have to keep on knocking on doors.

They don’t have to wait until you want to be in. At the end of the day, we’re slowly but surely going to push buttons to make our change known. All of a sudden, it gets harder and harder to substantiate this big branch with gun metal in the vault and safe deposit boxes.

Well, we did do a super forecast on branching in the United States. Where our forecast came up, and this is off available data from the Fed, is that we’re estimating that by 2030, branches will reach the halfway point of the maximum, which was 99,000 branches in 2008. We’ll be down to 50,000.

This is within five years. You said that there’s still going to be branches in our lifetime, but the UK is expecting sometime over the next few years to get down to 2,000 branches. Now, it’s not as big a market as the US, but do you expect the decline in branches to accelerate in the US, or do you expect over the next decade or so that it will continue this slower decline that we’ve seen in the US? That’s a 60,000 branch question.

I think we’re going to see it accelerate because I think what’s going to happen is the pain of not being digital is going to get greater than the status quo, the comfort of I’m going to be profitable. The reality right now, Brent, is I’d rather make money without the cost. I want the spread.

The spreads are better now. We’re generating deposits. Now, we’re generating loans.

Overall, the banking world from a financial standpoint is in really good shape, but it’s nowhere near where it can be optimally. I look at those credit unions that have zero branches that are all digital like aligning in Chicago. You look at Navy Fed, all these companies, they’re making a whole lot more money and their multiples are greater.

Why? Because they’ve solved- They’re more operationally cash efficient. Exactly. Yes.

And this is even before we start talking about agentic AI. Imagine you’re in a Tesla dealership and you speak into your phone and you tell your agent AI, go off and find me car financing for this new Tesla, and it comes back with three offers and you go bang. Same for home financing and so forth.

Open AI, perplexity, these guys are going to be pushing that type of capability as your infrastructure, your personal infrastructure. This is not going to be something they’re going to do for free. Exactly.

The thing is, though, that’s why bankright.com, that’s why some of these other organizations have so much activity because people now know, I don’t have any problem opening a savings plan over in Seattle because bottom line is, it’s not like the money actually is going in a brink truck anymore from Cleveland to Seattle. I think, yeah, boy, we can get in this discussion a whole lot on protecting against your lack of digital future, but the way you got to look at it, you want to wake up call, start looking at your flow of funds. Start looking at where money goes from your best customers and where it’s flowing every single month.

Most organizations, midsize organizations aren’t tracking that enough to know that every single month they’re losing business opportunities because they’re not digitally ready. That’s why those branches exist because it’s a soft worn blanket. Just to emphasize that point, one of the metrics that we repeated in this book that I had in bank four as well is if you have any doubt about this as a bank operator today, do this exercise.

Go and measure how many times your customers have visited your branch this year. You can do that fairly simply because you can see when there’s a transaction or a sales inquiry, when your ID is entered in the system, so you can track that. Measure that, not ATM visits.

It’s got to be a true branch visit where you speak to a human. Measure that same statistic over the last 20 years and look at that pattern of decline in terms of visits to the branch for those types of discussions and engagements. That data alone, most banks still, I’m astounded, don’t measure that as a core operational metric, but that data alone will tell you everything you need to know about investing in digital engagement and digital revenue.

You have one more metric to that, Brett. Find out how many people have gone to your credit card, checking account, or savings pages on your website because they’re not going there because they want to read. They’re going there because they want an account.

Those are potential customers. Now, mind you, there’s a ratio and all that, but look at the number you just said, the number three that walk in the branch. Look at the number that visit those key pages that are shopping pages for you.

I’ll tell you what’s the difference are the losses because you’re not getting customers or simply subtract the number of digital accounts you actually open. I’m going to tell you it’s not that people don’t want to open digital accounts. You make it too tough on them.

I mean, I’m going to say that’s 85% of the organizations out there. Well, guys, how many years ago was AppleCard? I mean, AppleCard was what? Seven years ago and it still was only three clicks on your phone and it was done. Yeah, that’s the bar that’s being set.

I got it right here, but I never used a physical card. Hey, listen, Jim, let’s wrap. First of all, I want to congratulate you on your first best-selling book title.

You are now a best-selling author, which we knew you had it in you, of course, but congratulations and thank you for your contribution. It was invaluable. It’s obviously a key chapter in the book and I appreciate your friendship over the years and your contribution in this.

If you’re interested in the book, you can order it now, pre-order on Kindle, go to branchtomorrow.com for more information about it. There it is. Jim has his copy before I have because mine’s sitting back in Bangkok waiting for me to get home.

My autograph, though, so I’m taking it when I see you in a week. I’m going to take it and have you autograph it. You can autograph it yourself, but yeah, I’ll sign it as well.

I’ll sign it as well. Thank you for your contribution. This is a really interesting conversation.

It’s an important conversation to have, especially in a market like US, where people are very focused on trying to find something to do with their remaining real estate instead of dealing exactly with the issue you’ve pointed out, which is you have to be digital first in order to survive what’s coming next. Yeah. Love it.

Thanks, brother. Check out branchtomorrow.com, go to Kindle, make an order and thank you to Jim for his contribution. You’re listening to Breaking Banks.