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Digital everything ...

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Digital everything ...

Nancy Bush is a veteran bank analyst. The following does not constitute investment advice, and the views and opinions expressed in this piece are those of the author and do not necessarily represent the views of S&P Global Market Intelligence.

For those who may be in need of a reminder of how complex the very largest American banks are — and those who want to hear how that complexity may be clarified somewhat — let me recommend that you go back and listen to the archived version of this year's JPMorgan Chase & Co. Investor Day, which took place on Feb. 26 in New York. This is an annual event and has become a must-listen even for those analysts (like me) who no longer formally follow the company — mainly because there is always keen interest in what might pop out of the mouth of the famously unpredictable Jamie Dimon, and secondly because the day is always a tutorial in what new and interesting things are going on in American banking.

This year's version was a bit of a departure from past years, and thankfully so. The JPM Investor Day has traditionally been just that — a full day — and listening to it had become an exercise in endurance and concentration, aided by massive cups of coffee. It was a topic-by-topic presentation by all the members of senior management on their respective areas of expertise, and I must admit that my eyes began to glaze over by the early afternoon, usually during the credit card presentation. This year was shortened to a morning, and the presentation was given solely by CFO Marianne Lake — she of the rapid-fire delivery and the decidedly non-posh English accent — ending with a Q&A with all senior managers and closing remarks by Mr. Dimon, who did not fail to disappoint those of us who had been awaiting some colorful language and some plain speaking.

The most interesting commentary — for those like me who may have the luxury of looking at the bigger picture rather than focusing on earnings minutiae — came on the topic of digital banking, and while the world may identify Bank of America Corp. as the banking industry’s digital leader, I’d say JP Morgan Chase is neck-and-neck in its digital delivery expertise overall and probably ahead in some of its digital wholesale applications. Ms. Lake's presentation was chock-full of numbers, statistics and interesting terms, but they all came down to one inevitable conclusion — that banks like JPM are increasingly enabling their clients (of all types) to do more with them via digital means, and as a result, clients are doing more of everything and more new clients are coming in the door.

The most interesting part of the digital presentation involved the process of client "on-boarding" — which I interpreted to be the snazzy new term for "signing up" — and the degree to which the digitization of these processes has given an advantage to the banks like JPM that are savvy enough to adapt them. The process has gone from one that is paper-intensive and sometimes frustratingly long and intrusive to a series of digital approvals and documentations that can take literally, well, minutes to complete. Even for wealth management customers, the process of setting up a self-directed investment account has become as easy as setting up a checking account, and those ascendant millennials are sure to like that as they finally begin to think about retirement.

On the consumer side, Ms. Lake put up a slide (No. 13, for those of you who may want to follow along) that showed all the ways that a retail customer may interact digitally with JPM on a daily and monthly basis, and it's an impressive list. Whether it's the now more-prosaic acts of using an eATM or depositing checks, or using the more exotic P2P platform for splitting the lunch check with friends, or getting investment advice — Chase now has 47 million customers who bank through digital channels and average 15-plus log-ins per month.

We also noted with amusement that Bank of America put out a press release on Feb. 26 (the day before the JPM Investor Day) — titled "Bank of America Accelerates High-Tech, High-Touch Approach" — trumpeting their own 35 million digital clients and their suite of products, including digital mortgage, a mobile car-shopping tool, a small-business digital lending platform, and a new financial concierge (named Erica). But BAC is not giving up on branches. They will be adding 500 new financial centers in Ohio over the next four years, and 600 of their existing centers already have "dedicated learning centers with interactive tools" that allow clients to learn how to navigate the new digital banking world.

OK, so lots of banking customers in lots of markets have lots of digital banking options. But what about the rest of us? I hear and read a lot about the digital divide in America, which is usually taken to mean that part of America that has access to good internet connections and the means and machines to access the digital world versus more rural areas where wireless is spotty (or there's only dial-up) and the children especially are put at a massive technological and educational disadvantage. That is a true condition, and a truly shameful one, and something that every politician in America should be working to correct ASAP. But does this digital divide extend to access to banking services as well?

I spend my time these days looking mostly at the community banking world, and I worry that a lot of these companies have not yet fully absorbed the implications of the digital revolution. Yes, some array of mobile and digital banking services is available at even very small banks these days — thanks to the relentless driving down of technology costs in recent years — but I worry that we have passed some inflection point in what small banks can provide versus what their customers will need and demand in the future.

While we may joke about the millennials and their seeming remove from their financial services providers — their oft-stated desire to never go into a bank branch, for example — the reality is that this large cadre of younger people will soon come to dominate the ranks of banking customers, and they will demand the banking services that their friends have and that they see displayed on social media. For those young people who live in the areas like the one that I live in now — part rural, but close to a big city and to a big college town — will they increasingly bypass the hometown banking option in favor of a bank that can give them the digital products that their parents can live without?

Look, even us old geezers are learning new tricks. I am officially known to my friends as the Queen of Orphan Brands, due to the fact that I use still use a Blackberry and drive a Saab (and have done so since 1985 — no, not the same Saab). But I finally caved and gave up my Blackberry Bold a few days ago in favor of the Blackberry KeyOne, which combines a keyboard with an Android platform. After first setting up my security options and locking myself out of the phone, I have now learned to navigate the screen and may start doing things like mobile deposit — which I never, ever thought in my life that I would do. Old dogs and new tricks, indeed.

Yes, relationships still count in banking, and community banks do those better — no doubt about it. But in a world that is rapidly becoming digital everything, those relationships will increasingly be defined by the strength of the digital handshake, and that will increasingly be the tie that binds customers to their banks. I hope that all American banks — regardless of their size — can understand and benefit from that revolution.