Gallup Finds Electronic Options Haven't Dampened Enthusiasm For Branch

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A recent survey by the Gallup Organization offers further evidence that the popularity of automated teller machines and online banking has not dampened enthusiasm for branches.

Eighty-three percent of the 1,011 adults contacted by telephone in April told the polling firm that they visit a branch at least once a month, for business other than making an ATM transaction. Of that percentage, 17% described themselves as heavy branch users, meaning that they visit a branch four or five times a month, and 12% said they made more than one visit a week.

Gallup, of Princeton, N.J., disseminated the data as part of its Gallup Tuesday Briefing, a subscription-based news service. It also compared its findings with those contained in the report to Congress on retail banking services and fees, a report that was issued by the Board of Governors of the Federal Reserve System in April and made public this month.

Key Decision Driver

The conclusion by Gallup, as reported in its briefing: "Despite the changes in banking technologies, the bank branch continues to play a key role in determining customers' relationships with their banks." Dennis Jacobe, the chief economist for Gallup Tuesday Briefing, said his company's survey results should give reassurance to banks that are in the midst of branch expansions.

"It is a common misconception that people are not going to the branch," Jacobe said. Banking executives should not overestimate technology or underestimate the importance "of going to a bank and doing normal kinds of things as a routine matter," he added. "The relationship with the customer is built through the branch."

Indeed, the poll seems to show that people use more bank services overall when they have more channels to choose from. Use of online services, phone banking, and ATMs all rose compared with Gallup's previous branch-use survey, in March 2000. Internet banking had the biggest jump: 29% said they bank online at least once a month, against 7% in the previous poll.

ATM Usage Statistics

Fifty-seven percent of those surveyed in April said they use ATMs at least once a month, against 48% in the 2000 survey. Fifteen percent said they use them two or three times a month; another 15% said four or five times; and 18% said more than five times. (The only breakdown for 2000 was use of once a week or more, 27%.)

Anat Bird, a former banker who is now the president and chief executive officer of SCB Forums, a Granite Bay, Calif., organization that runs meetings for supercommunity bankers, said some banks that expanded their branch networks in recent years "benefited from the fact that others pulled in their horns. They watched their market share grow. Now everyone is saying, 'I want de novo branches.' "

Bankers do not always understand the importance of branches to customers, Bird said. One of her customers once told her that he would change lines to wait for a favorite teller, and another told her he had changed banks when a longtime teller quit, she said.

On the flip side, Bird said, "Now we will see an overzealousness of branch-building, which will end up not necessarily helping all the banks involved."

The Federal Reserve Board's annual report to Congress on retail bank fees indicated that banks in general were charging more for all services, including ATM use. But Gallup's survey found that people are using ATMs more often, fees or no fees.

Paying For Convenience

"People will pay for that convenience," said Jacobe, who recalled seeing the same phenomenon with currency exchange. But "people just went crazy over" the $3 teller fee some banks instituted a few years ago, he said.

"That was very unpopular. Obviously the market didn't duplicate it. I think what has happened is most banks have gotten through the process where they thought they would substitute transaction channels," Jacobe said. They "are building onto existing systems in terms of convenience. Your ATMs are important, but if you can build a human relation-ship, there is a payoff for that."

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