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Banks Are Facing an ‘Uber Moment’

According to one report, banks’ Uber moment will mean a disintermediation of bank branches rather than the banks themselves, and the shift to mobile distribution being the main channel of customer interaction.

(TNS) -- There's a good chance you haven't visited a bank branch lately.

Americans since at least 2014 have been doing more banking on digital devices than at physical branches. That trend could lead to a 30 percent reduction in branches and nearly 800,000 layoffs during the next decade, according to a new Citi Global Perspectives & Solutions report.

"The future of branches in banking is about focusing on advisory and consultation rather than transactions," the report says. "The return on having a physical network is diminishing. Branches and associated staff costs make up about 65 percent of the total retail cost base of a larger bank and a lot of these costs can be removed via automation."

There were 32.4 bank branches per 100,000 U.S. adults as of 2014. Citi expects that number to drop 33 percent by 2025, causing substantial layoffs.

U.S. banks employed 2.93 million people at their peak and 2.57 million in 2014. Citi projects bank employment will dip to 1.8 million by 2025.

Bank executives in recent months have argued the industry is about to face an Uber moment — a tech-driven disruption of the way they do business and interact with customers.

"Banks’ Uber moment will mean a disintermediation of bank branches rather than the banks themselves," the Citi report says. "Specifically, it will mean the shift to mobile distribution being the main channel of interaction between customers and the bank."

Customers interact with banks an average of 17 times per month, according to the Accenture Banking Customer Survey, cited in Citi's report. Of those 17 interactions, 15 do not include human contact.

While this is bad news for branch workers, it is creating new opportunities in banking. Goldman Sachs CEO Lloyd Blankfein last year declared, "We are a tech company," adding that 30 percent of the bank's employees are engineers and programmers.

Closer to Indianapolis, Cincinnati-based Fifth Third Bank is shaking up its workforce. The bank is nearing the end of an effort to close 105 branches, including one last year in Broad Ripple. But now Fifth Third is seeking to hire 200 information technology workers this year as part of a goal to have more than 1,000 tech workers by the end of the year. That would mean one out of every 20 Fifth Third employees works in tech.

Fifth Third is recruiting for tech talent in Indianapolis, spokesman David Hosick said, though he added most jobs will be based in Cincinnati.

"Indianapolis is a place that's drawing national attention in tech circles," Hosick said.

Citi's report warns bank must make the transition from in-person customer service to digital service — and fast.

"Time and again, we have seen digital disruption fundamentally erode value across many industries including: music sales, video rentals, travel booking, and newspapers," the Citi report says. "In each of these cases, incumbents either transformed or became marginalized."

©2016 The Indianapolis Star Distributed by Tribune Content Agency, LLC.