Retail banking these days brings to mind the adage about academic politics, where "the competition is so vicious because the stakes are so small."

Low interest rates, a soft economic recovery and new regulations are continuing to shrink the stakes — or at least the current profit and revenue growth — in retail banking. Now financial companies of all sizes are struggling to increase the returns that they can eke out of their remaining operations, while trying to elbow their competitors out of the same turf.

"We face enormous headwinds, as all of our peers do," Cece Stewart, the retiring president of U.S. consumer and commercial operations at Citigroup (NYSE:C), said in an interview last week.

Stewart's second-in-command, Will Howle, is one of the senior executives scheduled to speak in Orlando this week at Retail Banking 2014, an annual conference presented by American Banker. He will be joined by Bruce Van Saun, Chief Executive of RBS Citizens and the man Royal Bank of Scotland has charged with divesting that U.S. unit through planned public offerings; Catherine Bessant, the global technology and operations executive at Bank of America (BAC); Manuel "Manolo" Sánchez, CEO of BBVA Compass, the U.S. unit of Spain's Banco Bilbao Vizcaya Argentaria; and executives from Wells Fargo (WFC), SunTrust (STI), Santander and many other large, regional and community banks.

These executives will be discussing some of the same big questions that have wrestled with retail bankers for years now, including how to manage head counts, branch networks and product pricing. Here are three hard facts retail bankers need to face as they continue those perennial discussions:

1. Branches are going away. So are some products.

Despite decreased foot traffic from increasingly tech-savvy customers, some of the country's biggest banks have spent the past few years continuing to build even more branches. That appears to be about to change, at least at the industry bellwether that is JPMorgan Chase (JPM); last month, the country's biggest bank abandoned its two-year plans to build another 100 new branches and said it would switch to "optimizing" the physical locations it now has. JPMorgan is now following in the footsteps of banks from Citigroup to Umpqua (UMPQ), which have all unveiled smaller, less-staffed new branch models in the last few years.

Many banks are now using their remaining locations to sell financial planning, asset management and related (highly lucrative) services to their wealthiest customers. At the same time, banks have dropped products they once offered to less affluent customers, including short-term credit. Earlier this year, several companies, including Wells Fargo, U.S. Bancorp (USB) and Fifth Third Bancorp (FITB), stopped offering "deposit advances," or their versions of payday loans, after regulators tightened restrictions on them.

"It's not obvious to me what the replacement product" is, Andy Harmening, a Bank of the West Senior Executive Vice President (and a speaker at this week's conference), said in a February interview.

2. Technology can solve some problems, but it creates others.

Banks are trying to keep their customers happy — and keep costs down — with an array of online and mobile banking technology, from bill payment and check deposits to person-to-person payments. Some banks have recently made bigger bets on technology; BBVA, for example, last month announced a deal to acquire the well-regarded online startup Simple. Bank of America last week unveiled a new, paper-free checking account that will charge customers a monthly $4.95 fee.

But banks are struggling to innovate quickly enough to keep up with their outside competition. From Google and Apple to Bitcoin and even the U.S. Postal Service, nonbanks are jumping into businesses once controlled by the traditional financial services industry. That has accelerated the competition beyond its already-fierce internal wars among banks of all sizes.

Big banks are trying to keep more of their wealthy customers' business in-house, in part by developing new products. Wells Fargo, for example, is developing new credit cards, while it has joined JPMorgan Chase, Bank of America, Citigroup and many smaller rivals in trying to bulk up in wealth management. Small banks aren't completely sidelined, either. For example, the $2.2 billion-asset Seacoast National Bank (SBCF) in Stuart, Fla., has been hiring financial advisors and expanding a luxury rewards program to attract more business from its wealthiest customers.

"Our sweet spot on the investment management side is that $500,000 to $3 million range, which is underserved right now by our regional and national competition," Thomas L. Hall, Seacoast's executive vice president of wealth management and private banking, said this fall.

3. Acquisitions could help, in theory — but don't hold your breath for a better M&A market.

Banks could theoretically solve some of their retail banking problems by buying or selling each other; for example, the easiest way for some superregionals to compete with retail behemoths like JPMorgan or Bank of America would be to try to match their scale through acquisitions. But bankers and potential dealmakers are pretty pessimistic about conditions in the near future. Regulators are unlikely to bless any large-scale mergers in any sort of timely fashion, they say, and there are too many questions about the risk that potential buyers could be acquiring along with any operations.

"Buyer beware," in the November words of Richard Davis, the CEO of U.S. Bancorp and one of the executives considered to be one of the most likely potential buyers. Other oft-mentioned buyers and sellers, including TD Bank executives and RBS Citizens' Van Saun, have thrown similarly cold water on most deal speculation in recent months.

"It's not that we would mind it. It would have to be the right deal for the right reasons," says Greg Braca, head of corporate and specialty banking at TD Bank, adding, "If you can't figure out a de novo strategy, where you can't take share [without a deal], you have a broken model."

Maria Aspan is the national editor at American Banker

Read more: