I’ve shared a few of my views on Apple’s potential to be a consumer bank and how consumer lending is heating up. Yesterday I had the opportunity to chat with someone who’s worked at one of the largest US banks for over twenty years. Our conversation was social, but I couldn’t resist sharing my views and getting his take on where banking is headed. Our chat was enlightening. I learned a great deal about the inner workings of the bank, how the largest banks view Atlanta as a strategic city and are expanding rapidly, and how this has led to a hyper competitive Atlanta market for bankers, with salaries rapidly increasing.

One of the biggest takeaways was that what matters to consumers in a banking relationship is changing fast. Historically, large banks won because of their branch networks. The more branches, the better. Consumers knew that wherever they were, they could find a branch and get whatever help they needed. The branches were banking’s version of distribution. The branches were a core part of how the products and services the bank offered reached their customers. Establishing a network of brick-and-mortar branches was costly and time consuming, so the largest players had moats giving them defensible competitive advantages.

Now, consumers are rapidly shifting from in-person banking interactions to digital banking interactions. You don’t need to go to the bank to deposit a check or get a loan. You can do many tasks electronically via a mobile app or website. Because of this shift, consumers evaluate banks differently. Consumers care less about a network of branches because they don’t need to visit branches. They care more about digital tools. They want the best and easiest-to-use technology.

This banker was telling me that digital distribution is changing the banking world. The large banks that previously had the best distribution because of their branches are seeing their moats erode quickly. The companies that offer the best digital experiences are winning.

How companies get their solutions in customers’ hands matters a lot. Said another way, distribution matters a lot. The digitization of distribution will drastically change banking. Apple, Square, and other companies will compete for banking relationships like never before.