Inner City Banking - The monetization

As described so far, the bank is extremely lean by having no physical locations. Avoiding physical stores reduces costs in several ways. First, the bank doesn’t have to pay rent for the location. Second, they don’t need a vault, extra security, or the costs of armored trucks to transport money. Lastly, they don’t need to have retail representatives who may spend much of the day idle. These costs are significant enough to get McKinsey’s attention, in fact, the costs of branches account for 40%-60% of operating costs. If those costs could be avoided with being replaced by other costs, then this bank could make 25% more profit than other banks. Now, I don’t think that will be the case, as I expect this bank to have less revenue per customer than other banks. I think reducing fees, giving higher savings rates and lower loan rates would cut that 25% down to 15% or 10%. About 5% of the profit would get transferred to the non-profit arm (but that would also reduce the bank’s tax bill).

The in-store ATM equivalent would involve installing a low-end smartphone ($50) that uses only a small amount of data that is required to pass along withdrawal and deposit information. It would also serve as the verification for the transaction (through scanning the QR code and the acknowledgement of the cashier). The local business would take a 1% cut of the transactions. They get other benefits like additional foot traffic.