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Where did American banks go wrong?

First Bank of the United States in Philadelphia—now a Ritz Carlton hotel.
Published Last updated This article is more than 2 years old.

I bet you think the American Revolution had something to do with tea and taxation-without-representation. Nope, there was a bigger reason: Great Britain would not allow its colonies to have banks.

So we went to war in part to have the freedom to build our own banks. The early ones financed this revolution and they were built to make a statement—one of optimism for the future and permanent stability. Their brick and mortar anchored the growth of a nation, expanding to play a critical role in our lives—one that made our amazing history possible. In 2008, the modern versions of these architectural pioneers almost collapsed our economic system and lost most of the trust they’ve built.

Between the Declaration of Independence and today, where did American banks go wrong?

First a little history—our first bank, the Bank of North America, was established in Philadelphia in 1781 to help finance the aforementioned revolution. By 1789, there were three American banks in existence, and Alexander Hamilton really thought it was time to have a national bank. The Constitution did not provide for this, and the (somewhat prescient) Thomas Jefferson considered banks to be more dangerous than standing armies. In brief, Hamilton convinced Washington to go ahead and build one that would set the tone for banks as symbols of American capitalism.

“The First Bank of the United States would be a watershed for banking design—it would establish the bank as a building type worthy of exceptional and expensive architectural expression. All banks in America, even in the smallest of towns, would follow this tradition in one architectural style or another until the Great Depression,” writes Charles Belfoure in Monuments to Money, The Architecture of American Banks.

It became known that to establish their reputation, banks must be built to look substantial, stately, and sophisticated. This message was aimed at the wealthy and the merchant class, who would need to put their trust in these new institutions along with their fortunes. Eventually, every town would have their own “temple of finance” and they all were built to convey variations on the same theme—“this is a safe, solid place to put your money.” Variations in architectural style followed the times, but this desired perception was the constant. From the Corinthian columns, copper clad roofing and marble balustrades of our first banks to the Greek revival era attempts to re-create the Parthenon with its Ionic columns and sense of ancient grandeur and even the skyscraper banks and Frank Lloyd Wright designs of the early 1900s—these were ALL built as fortresses and temples of money. Even after the Great Depression, as banks opened up their exteriors, the internal vaults still gave the impression of strength and security.

Fast forward to the 1990s—now secured by the government, banks began looking like fast food joints, sitting in strip malls with bright lights and colorful logos drawing you in. Getting caught up in their expansion of services, retail bank builders lost sight of and stopped conveying the core promises of safety, stability, and trust with their architecture. Even the massive, shiny vaults became boring and uninspiring—while the grand old ones became fancy hotels and restaurants (like the former Girard Trust Company in Philadelphia which is now a Ritz Carlton, or many of the restaurants in New York’s financial district, like Bobby Vans, that make use of vaults as dining rooms and wine cellars). They went from being temples of trust to financial product retail stores guided by the rules of fast-moving consumer goods marketing.

Meanwhile, behind the tacky facades, it was even worse. Banks fractured into profit-driven product silos competing to make money quickly. The short-term focus and increased complexity of these products (like the infamous Collateralized Debt Obligations we all wish we’d never heard of) combined with de facto government support, created the conditions that led to what became the Global Financial Crisis. Would bankers working in buildings that were once symbols and reminders of our country’s founding institutions have even considered such reckless risk-taking?

The grand old banks we once had faith in are now filled with retail stores and pricey condos. We never thought much of (and now avoid) the fast food versions. And web-only banks don’t exactly inspire confidence. In fact, reputation studies since the financial crisis show that we don’t think much of banks at all, and barely feel okay about our own bank (as of 2014, customers of American banks have a little more than a 50% chance of recommending their bank to others).

If banks want to regain their place and thrive again as pillars of strength in our communities, they have three choices as I see it:

  1. Become a utility. Turn the core of the industry over to government, protected from competition and run by the regulators.
  2. Run Superbowl ads. Associate with lots of good deeds and find ways to charge people more for what you already provide them.
  3. Earn it. Find ways to help your customers, do it well, do it for a fair price, and when they tell you they’re impressed, ask them to share the good word with their friends.

I’m not a fan of the first two, and I’d like to add some commentary to the third before I wrap up—as big banks get bigger (not the size of their buildings, but the number of branches), I believe they lose touch with the idea that reputation is constructed locally. That sounds scary to big banks (too big to…) who are trying to architect reputation centrally. How can they possibly manage online presence for hundreds or even thousands of local branches? Well, the good news is that technology has reached a point where it can help large, complicated businesses with a presence in multiple communities. The very nature of the conversation (local yes, but also digital) lends itself to a technical solution that can enable large chains to engage locally, and personally, at scale. Imagine if a bank could go to customers, respond to their inquiries and comments, and ask them to share their experiences, good and bad, every day, in every branch, with quantitative measures to track success? This is the new architectural aspiration of the digital age: listen to customers, serve them well and let them rebuild your reputation.

📬 Kick off each morning with coffee and the Daily Brief (BYO coffee).

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