I was delighted to read recently that First Manhattan Consulting Group has joined many banking industry practitioners - myself included - in realizing that the rumors of the death of the bank branch have been greatly exaggerated.
Many of us, including proponents of the super community banking concept, have held steadfast in our belief that the branch was a viable delivery device in the face of mounting "evidence" that branch customers are unprofitable and that the future lies exclusively in remote delivery. It was rewarding to read that First Manhattan's most recent study recanted its previous position that only 40% of the customers currently use the branch and most of those are the "losers."
The most recent First Manhattan study states that a whopping 88% of all bank customers rely solely or partly on the branch as an important component of their perception of the bank and, furthermore, branch-only customers turn out most retail profits.
This kind of thematic turnaround is not atypical of our industry. We tend to go with fads that become fashionable overnight, only to watch them wilt slowly within a year or two. The electronic delivery boom is but one example of such a fad. Recent articles in American Banker, The Wall Street Journal, and others prematurely laud the nature of home banking, particularly PC-driven home banking, as the end all. Customer penetration figures indicate that only a small percent of the population, particularly in highly urban areas, is attracted to these types of delivery modes.
However, while such customers are becoming more prevalent, the pace of this change may be huge percentage-wise, but it is not in absolute numbers.
Mr. and Mrs. Middle America still want to have a physical facility available to them, even if they don't come to visit very often. Edward D. Jones & Co., a broker with more than 3,000 branches, and most successful mail order houses, such as Sharper Image, Williams Sonoma, Pottery Barn, and the like, have already discovered the importance of physical distribution. They open stores on precious real estate in order to meet needs on the customer's terms.
There are many lessons to be learned from the movement "back to the roots" of banking.
The spirit of those lessons was reflected in the recent retail delivery conference, which, unlike last year's, did not focus on "star wars"-like technologies and new, untested applications but addressed what to do with what we have: the branch. The key, said analysts Tom Brown and Nancy Bush, is in execution. All of us are going after the same customer. We have to recognize that.
The winners are not going to be those who will have the most sophisticated gimmicks but those who clearly identify their goals from the broad strategic objectives to daily sales goals at the branch level and execute those goals effectively. As we do so, we should watch for other fads that will come our way.
The industry is changing. We need to integrate new delivery channels, sales philosophies, work force components, and other variables in an effort to continue to modernize our industry. At the same time, let's be careful not to blindly follow the fads, a practice for which we have paid so dearly in the past. Tending to basics is still important. In addition, the prescription for success demands that bankers keep an eye open for the sea change taking place in our business, and that they integrate those components of the change that make the most sense.
Ms. Bird is chief operating officer of Roosevelt Financial Group, St. Louis.
