In conversations with management and strategy folks of banks, downsizing is an unavoidable subject.
Some speak of reductions in total number of branches. Some expect to keep about the same number of branches but look to replace larger and underutilized locations with smaller facilities.
Almost every banker I've spoken within the past year has a "new prototype" either on the drawing board or in a pilot program. I've had the opportunity of visiting quite a few prototypes and have been impressed by many. Self-service technology isn't the future. It's the present.
Many smart people in our industry can, and do, disagree on just how quickly the branching landscape will change. But most agree that the size of individual branch teams will shrink at a faster pace than we are able to "right size" our branches.
An analyst friend recently told me he believes that the industry doesn't necessarily have too many branches. But we do have too much square footage and real estate.
His lament was that oversized branches, still profitable, were being (albeit correctly) staffed by teams half the size of the past. He joked about the depressing, empty spaces he finds in many older branches.
While long-term plans are to replace bigger structures with smaller ones, that's not going to happen quickly for most banks. Many are unwilling or unable to take the kind of financial hits they would take shuttering mature branches.
We're like empty-nesters with homes far bigger than we need in a weak real estate market. Sure, we have more space than we're using, but we're still fond of the homes. They're in nice neighborhoods … and they're paid for.
Besides, reducing staff numbers is where the majority of cost savings are realized in existing, underutilized branches. Bigger and older branches are being retooled with technology that reduces staff. This is creating empty teller windows, meeting rooms, offices and lobbies. And as my friend worries, the impression of partially "deserted" branches is not a positive one to make on customers or, for that matter, our branch teams.
One of the questions I've been posing to branch bankers is, "If you're not using a lot of the space you have but can't realistically get rid of, how you are deriving value from it?"
I suggest one way to accomplish this is using that space to provide value to others who are highly valuable to you – small business customers.
This customer segment has always been important to banks. But economic and regulatory conditions over the past few years have made these customers top or near-top priorities for many banks.
The targeting and courting of small business customers has become part of many banks' core training programs for most branch personnel.
I look at many bank branches and think, "One man's wasted space is another man's treasure." Bank branches may have reduced customer traffic by our historic standards, but we still have far more traffic than most small businesses in our communities.
Finding ways to spotlight and promote our small business customers within our branches accomplishes several things. It strengthens a customer's bond with his bank like few things can. Most small business owners go to bed each night thinking about ways to promote and grow their businesses.
Being periodically "spotlighted" in their bank's branches is something that most would only dream about. Their business, big or small, is given additional exposure, and maybe even higher perceived status, when highlighted by a bank.