This past week at the Money 20/20 conference in Las Vegas, Diebold (NYSE:DBD) displayed its concept of what could very well become the bank of the future.
Even though many of the big banks are downsizing their physical footprint amid all of the technological advances in the industry (mobile banking, online lending, etc.), Diebold doesn't believe branch banking is going to disappear anytime soon. It does, however, believe there is a more efficient way to do it.
What Diebold is working on
Diebold's Responsive Banking Concept is essentially a self-contained banking branch in a small space, and is meant to combine advancements in digital technology with physical banking.
The concept is entirely unmanned, and uses technologies such as near-field communication, location-based proximity sensors, and Microsoft Kinect motion-detecting technology to interact with customers.
In the middle of the setup is a quick-service feature, which works much like an ATM. Customer who simply need to withdraw cash can do so like they normally would at any ATM. However, a card is not required, as customers can use a quick-response code or their mobile device's NFC technology to enable transactions. Apple Pay is also supported for transactions.
For more complex services, such as fund transfers and certain deposits, customers can use their mobile phones or the concept's external touchscreens to "get in line" for a session with a virtual teller. Directional audio technology ensures all information is kept confidential (only the customer can hear what is being said).
Finally, customers who want consultation services, such as discussing loan options, can access a live interaction with a remote banking expert via the latest in interactive and privacy technology.
A more thorough description of the concept is available on Diebold's website here.
How it could integrate into the banking landscape
The latest trends have been toward a reduction in the number of physical branches by the major U.S. banks. Diebold's Responsive Banking Concept is designed to allow banks to actually increase their physical presence while reducing expenses at the same time.
It could allow banks to create "branches" where their customers are, without the overhead associated with constructing a new building and hiring a staff. Diebold says the concept is ideal for locations such as malls and airports, but could even be used in smaller places such as retail stores.
A bank could actually close an existing branch, put several of these units in its place, and save money while expanding its physical presence.
What about Diebold as an investment?
As an investment, Diebold's stock is very similar to the products the company produces: efficient, reliable, and secure.
For dividend investors, although Diebold's 3.2% annual payout yield isn't exactly "high" by many standards, it does increase like clockwork every year. In fact, Diebold has the longest streak of consecutive annual dividend increases (60 years and counting) of any publicly traded company.
Diebold is forecast to earn $1.77 per share in 2014, which translates to a P/E of 20.3 times this year's earnings, which are expected to grow by 16% in 2015 and 26% in 2016. So, although the valuation might seem a bit on the high side at first glance, if the growth expectations are accurate, it's actually rather cheap.
Plus, if Diebold's new concept catches on, the company could easily surpass those expectations in the coming years.
Diebold has been an innovator in the banking industry for some time, and has been producing secure and reliable products since 1859, when it started making the best bank vaults and safes in the industry. It's refreshing and encouraging to see that a company with such a long and accomplished history is still capable of innovation in its industry, and I think Diebold has a bright future ahead.