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Imagine an urban bank where a customer takes an elevator to the fourth floor to enter the branch, takes a number, and sits down on a couch to wait. And wait. Eventually a teller approaches and takes the transaction paperwork, then disappears behind a low counter into an area that resembles a government office. Five, 10 or 15 minutes later, the banker emerges, transaction complete, and hands the receipt or cash to the customer with a bow. By this time 20 or more minutes may have passed and new product sales weren't even on the table.
August 1
They're spiffed up and souped up, and coming to an affluent area near you.
Meet the future of brick-and-mortar lending. Long rows of teller windows and imposing marble columns? Out. Private rooms, friendly greeters and bright open spaces? In.
Not every bank everywhere is opening new branches or making over old ones, and banks certainly aren't moving willy-nilly to re-do the branch system. But some that are committed to a new look — KeyCorp, Fifth Third Bancorp and M&T Bank Corp. among them — are working from designs that address a burgeoning problem: fewer people need to visit banks to do their day-to-day banking, thanks to the Internet.
As walk-in traffic declines, experts say, making customers feel as welcome as possible is central to post-recession growth plans at certain banks. Consumer research indicates that people still want to go to the bank from time to time to open up a new checking or investment account. But they don't need to wait in line to deposit Friday's paycheck.
"You want to design a branch so it is conducive to a quality conversation," said Robert A. DeAngelis, executive vice president and head of consumer banking with Cleveland's KeyCorp.
KeyCorp's branch network has a lot of the same problems shared by other sizable lenders that have grown by buying banks: a lot of its branches are older and don't match. KeyCorp has more than 1,000 of them in 14 states. Some date back to the early 1900s. Making over the entire network would be complicated and costly. So KeyCorp has been going about it selectively, refurbishing branches and opening new ones in high-growth markets like Seattle and in Colorado.
"We make sure we're doing [those things] in markets or new trade areas where there is new business volume," DeAngelis said.
Key opened 18 branches in the first six months of the year and has plans for another 22 by yearend. It expects to renovate 100 locations this year as well. The new locations are brighter and more efficient than old ones. They use technology that makes check processing simpler. Ads are displayed on video monitors, rather than wasteful paper displays.
Like KeyCorp, other banks that have been modestly investing in their branches are being selective about where to focus their efforts. Fifth Third, of Cincinnati, said it plans to open an undisclosed number of locations later this year, potentially in affluent markets like Chicago, Atlanta, or Orlando, Fla.
Raymond J. Webb, the head of Fifth Third's retail banking operations, said the company hasn't opened any branches so far this year, but will roll out its "customer-centric" offices in "high opportunity" growth markets. He said it's easier to sell a customer multiple products after winning their trust.
"What's important for us is building that relationship," he said. "It makes the customer very loyal."
Robert Meara, a senior analyst with the consultancy Celent, said these companies are pioneering a strategy that most banks will likely use to update their branches in the next five years. His firm conducted a poll of more than 200 banks in the U.S. and Canada in July. Among its findings: Bankers said that foot traffic is falling at branches and that they expect the trend to continue. Respondents said that branches will still be necessary in five years, but they anticipate that their footprint will need to be 10% smaller by 2015 and feature 20% to 30% fewer teller stations.
Few banks plan to invest in broad makeovers of their branches over the next five years; most of them will go about it like KeyCorp and others: changing the look and feel of their locations in places only in places where they think it makes the most sense.
"Most of them are going to make very selective changes to individual branches," he said. "Doing anything is so costly. There has to be a good business case for it."
Peter Eliopoulos, the chief marketing officer of M&T Bank Corp., said it began opening a modest number of branches with a glossy new feel late last year for a simple reason. It has better shot of stealing business from rivals at locations that look and feel fresh and inviting.
"It's about doing more business," Eliopoulos said. "We want our people to be happy."
M&T suffers from the patchwork branch problem too — having built its 750-plus-branch network through acquisitions. Any branch it builds or overhauls from now on will echo the look it unveiled at a location in upstate New York late last year. It has big glass windows out front and special blinds that are good for heating and lighting the space efficiently. M&T only has plans to open about four branches with this design at the moment, and it will work from those design plans as it refurbishes its typical 25 to 30 branches this year.
Popular Inc., a San Juan, Puerto Rico, company, is trying out a new look in Chicago that it may roll out to all 97 branches on the mainland U.S.
The company renamed its branches in Chicago from "Banco Popular" to Popular Community Bank in a bid to appeal to people that might be turned off by its foreign sounding name, said Manuel Chinea, head of Popular's North American retail operations. It has also started making its branch employees in Chicago wear uniforms, like they have to in Puerto Rico.
"Having a consistent professional look, I think, helps our employees position themselves as a trusted adviser," he said.
