Keep Your Bank Relevant: Rapid Changes in How Customers Bank Threaten Traditional Banking. It Doesn't Have to Be That Way, Say Three Community Bankers and Brett King, Author of "BANK 2.0"

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Jeff Smith has as much invested in the status quo of community banking as any other CEO. He's been with $826 million-assets Ohio Valley Bank, Gallipolis, for nearly 38 years, and now serves as chairman and CEO. He's a strong believer in community banking.

Yet Smith has been wrestling with a conundrum: Will banking as practiced by Ohio Valley Bank and thousands of others remain relevant? He's had some recent matters bring that to mind.

First, his own behavior. "I am certainly, by no means, a technocrat," said Smith. "But I recently realized that, while I'm in a bank every day, I do not conduct my own banking at the bank. I do my banking on the internet, using our online banking service, from home."

Second, a conversation with his 24-year-old daughter. "She's the daughter of a banker, and, at her age, she's written three checks in her life," says Smith. "And she recently commented to me, 'Dad, checks are archaic'."

Author Brett King also has a daughter, age 10. "She's a 'digital native'," says King, who is also a consultant and futurist. "She will never in her life write a check."

Now, if this was a matter only of checking, one could shrug. Debit cards and online billpay have been replacing checks for years.

But that's only part of what's going on. Rapid technological advancement has been reshaping what retail and business customers want from their banks. King summed up the challenge recently in his book "BANK 2.0: How Customer Behaviour And Technology Will Change The Future Of Financial Services":

"A staggering 90% of daily transactions are executed electronically today. Institutions that hold on to the belief that physical branches remain at the core of what the brand does, will not adapt easily to the customer of tomorrow who rarely visits a branch or the customer who sees no need for an over-the-counter transaction with cash or checks. Those who still classify the internet, ATM, and ..... iPhone applications as 'alternative' channels will be playing catch up for the next decade, while intermediaries will increasingly capture niche service opportunities .... "Understand one thing. Customers are not going back to the old ways of banking. They are moving forward. If you are not moving forward with them, then they will pass right by you--at warp speed."

King speaks of the need for banks to become "channel agnostics," meaning that "every channel is equally important, branches are just one." His perspective is also about abandoning the notion that banks are in charge. The customer is. And if the bank doesn't choose to serve the customer as they like, other players will weigh in. King writes of MoBank, a United Kingdom service operated by a nonbank third party that permits users to check balances and recent transactions with their banks and to make payments to certain retailers, all using their mobile devices. As King describes it, "the bank is just the back-end, the processor of the transaction."

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Ultimately, customer behavior is evolving. "It's not about mobile apps, it's not about mobile payments, and it's not about remote deposit capture," says King. "It's about a progressive behavioral shift. Yes, the Gen Ys like this stuff because it's on the move and it's fast. But the fact is that all of us really like it. So it's not about the devices themselves, it's about how the devices are changing behavior."

Often, futurists are interviewed in a vacuum. But we invited Jeff Smith into the interview along with two of his officers, Jodie McCalla, project manager for Ohio Valley's research and technical applications department, and Bryna Butler, assistant vice-president and director of e-services and corporate communications.

King has worked with some of the largest banks in the U.S. and the world, but he doesn't think community banks need to concede the field.

"The big banks actually have the biggest challenges ahead because they are very large and unwieldy, and trying to change will be difficult. …