Banking on Change (Part 3)

The world is getting older and more urban.

Source: UN

In 1970 the global median age was 21 and there were 70 people per square mile. By 2020 the median age will be 31 and there will be 150 people per square mile. This means bank customers are looking for different kinds of services. Older customers tend to be wealthier and need ways to manage what they have.

But what they have has been under assault. The steady drip-drip-drip of low inflation combined with interest rates at zero is slowly eating away at people’s savings. Since late 2008 average prices have risen 13%, while short-term rates have been at zero. With little fanfare, savers in the US have lost about a trillion dollars in purchasing power. Banks that help their customers keep ahead of the corrosive impact of inflation will thrive.

At the same time, a more urban population will need a different kind of bank branch. Sprawling floor plans need to give way to efficient, compact designs. And branch staff have to be knowledgeable: while 80% of retail banking transactions are done remotely, most bank customers still go to a branch every six months. They often do this to resolve problems: double-billing by healthcare providers; documents that need a notary’s signature; getting a guaranteed check. Convenience and expertise are crucial.

Demographics is the history that hasn’t happened yet. It’s not just the times that are a’changin’. It’s the customers as well.


Douglas R. Tengdin, CFA
Chief Investment Officer
Phone: 603-224-1350
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