What Higher Education Can Learn From the Banking Industry

Higher education should look to the banking industry for ways to adapt to and take advantage of technology.

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Joshua Kim is the director of Learning and Technology for the Master of Health Care Delivery Science program at Dartmouth College.

Of all the blinders limiting our ability to increase productivity in higher education, it is our insularity that has the greatest potential to do harm. We tend to look for inspiration and lessons only from other institutions among our post-secondary peer group, while failing to see the relevant wisdom in information industries in adjacent sectors.  

How many people from the music, news, energy, and defense industries do we invite to our campuses to tell us how they have navigated the digitization and unbundling of the economy? How many professional conferences outside of education circles do we attend? How often do we schedule education conference keynotes from leaders outside of education, and ask them to draw connections between their experiences and the challenges we face in our industry? My answer to all these questions: not enough.

If I could pick any industry to mine for knowledge pertinent to higher education, I'd pick retail banking. My fascination with the banking sector was piqued by a recent Economist special report titled "Retail Renaissance" on international banking.

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Like higher education, banking is both an information and service industry that is grappling with how to evolve in the face of growing consumer demands, increased global competition, and a rapidly changing technological environment. And like in higher education, in banking there has been the assumption that the spread of the Internet and mobile devices will eliminate the need for fixed residential branches. Online banking and online education also seem to share the potential to grow in tandem, providing services (financial and educational) to a new generation of wired and mobile consumers.  

The potential of online education and online banking to increase productivity in both sectors appears to be enormous. Traditional banking and higher education are ripe for disruption, as they are both high fixed-cost industries. The Economist article notes that  "for most big retail banks, renting, equipping, and staffing branches can easily account for 40-60 percent of their total operating costs, with computer systems making up most of the rest." A bank branch, like a campus, is expensive because its quality is a signifier to potential and existing customers. Nobody wants to put their money in a bank that does not look solid (or is easily robbed), just as nobody wants to send their kid to a college with a campus that fails to embody the timeless values of reflection and learning.

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At least in banking, however, the physical branch has not "withered away." Again, from the Economist article: "In America, which is still the world's richest banking market, the number of branches and offices has risen by 22 percent since 2000, to almost 90,000."  

What has occurred in retail banking is not a substitution of online and mobile banking for residential services, but rather technology is proving to be complementary. Banking customers expect to be able to visit a physical branch and speak to a live teller or loan officer, but also expect to manage their accounts online and via a smart phone. We all want the security of the branch, but the convenience of 24/7 online financial services. Pure-play online banks that initially seemed so promising when they appeared in the early 2000s, (such as Wingspan, Citi f/i, NetBank, Egg) have either disappeared or been absorbed into traditional banks. 

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What can higher education learn from the experience of retail banking? The obvious lesson is that the physical campus is not going to disappear. Quite the opposite, we may find that there is room to emulate the banking sector and grow our campus footprint, but grow in a way that mimics financial services rather than the traditional quad-and-ivy campus. For instance, can we open up "mini campuses," or campuses attached to large retail spaces? A college campus has traditionally been a one-size-fits-all place: one campus for all learners. Perhaps we can follow the example of the financial services industry and open specialized campuses for specific segments of learners.

The other higher education lesson that I take from banking is the inevitability of consolidation. Over the past 10 years we have seen a significant roll-up in the banking sector, as only bigger banks can hope to provide both the in-person and technology-based services that customers demand. A high quality online and mobile presence is difficulty to achieve, and the push to evolve these platforms is intense. Small banks cannot spread these development and operational costs across enough customers, which is one of the reasons (among many) that we have seen rapid bank consolidation.  

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In higher education we remain stubbornly atomized. It is frustratingly rare for us to share services or platforms across campuses, even between institutions in the same university system. It may be that rising costs (and therefore tuition prices) will force us to form partnerships to share common services (such as campus financials, student information systems, E-mail or document back-up), but we will certainly be years behind banking when it comes to consolidation.

What other lessons do you think that we in higher education can learn from trends in the banking sector? What industries would you nominate as holding essential lessons for higher education in the 21st century?

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