Few topics in the banking industry are more hotly debated than the proper use of technology in branches of the future.
Banks have shuttered more than 16,000 branches in the last six years, with 2017 on pace to be one of the busiest years on record for closures, based on data collected by the Federal Deposit Insurance Corp. Other locations are being replaced with smaller offices as cost-conscious banks trim occupancy expenses in the face of declining foot traffic.
Most industry observers still believe branches will have a role in the future of retail banking. While technology will let many banks cut staffing at the branches that remain, factors such as geography, customer demographics and strategic direction will ultimately shape the look and feel of future offices.
“Concerns about branches are well founded, but change doesn’t mean elimination,” Steven Reider, president of Bancography, a marketing and branch-planning adviser, said during a recent conference at the University of Mississippi. “Branches will have a long-term, enduring role.”
Renasant in Tupelo, Miss., is a recent example of a bank looking to reinvent some branches with varying levels of technology.
The $8.9 billion-asset company’s next branch in midtown Nashville, for instance, will replace staff with virtual tellers. In Franklin, a suburb of Nashville Tenn., and Macon, Ga., a more rural market, Renasant will have minimal staff to go along with virtual tellers.
“As we move to a more technological age, relationships will still matter,” Robin McGraw, Renasant’s chairman and CEO, said during the Mississippi conference, though he added that increased reliance on technology will “be the rule rather than the exception.”
A scaled approach to technology makes sense, industry experts said.
A cultural difference remains between people who live in cities, who are generally more comfortable with technology, and those in suburbs and rural markets, who tend to prefer more of a human touch.
“When I’m working with banks and doing my models, you have to allow more time per transaction in a rural branch,” said Lynn David, president of Community Bank Consulting Services. “It is a social event.”
Still, banks can find ways to reduce staffing expense, even in rural markets, by using virtual tellers, which can help with loan payments, withdrawals and other issues, David said. Trimming employee hours can reduce expenses tied to salaries and benefits.
Virtual tellers may also allow customers to quickly connect with a specialist, such as a mortgage banker, who may not be physically at a branch when the client is there, said Nick Miller, president of Clarity Advantage. That could provide better customer service overall.
Such an approach could also let banks rely more on clusters or pods, where one large branch houses most of the workforce. It would be surrounded my smaller locations with fewer employees.
“Not every branch needs its own manager,” Reider said.
Still, many in the industry are waiting to see what role virtual tellers will play.
“I always ask why people would go into a technology-only branch?” Miller said. “They can do most of it on their phones or laptops. But it is an interesting experiment.”
Despite a rise of technology, branch personnel remain vital as institutions look to promote sales and offer more consulting services. Hiring the right staff is paramount, making a bank’s “human resources director the most important executive,” Reider said.
Quote'I always ask why people would go into a technology-only branch? They can do most of it on their phones or laptops. But it is an interesting experiment.'
So far banks have struggled in this regard, industry sources said. Many small banks are failing to appropriately gauge if a branch employee is a good fit to provide consulting and sales services, David said.
“When you’re hiring someone for a customer contact role, you want someone who is able to develop the sales demeanor,” David said.
“You may find you’ve hired someone who would be great for loan support but will be petrified to ask the lady whose checking account went from $2,000 to $52,000 if she’d be interested in a short-term CD or money market account,” David added.
Various other issues can prevent branch staff from successfully becoming sales-focused. Poor planning with branch layouts can be a factor and managers may not have the time to follow up and provide ongoing support to branch staff, industry observers said.
Banks, while largely aware that the role of branches is changing, are still fighting against a rigid historical view of the overall model, Miller said.
“Many banks … are slow going to change a culture that has been inbred for a couple of decades or more,” Miller said. “Almost all banks are working on something, but are slow to change the ship.”
A slow pace of change could mean missed opportunities for bankers to start conversations with clients in the branch and beyond. Banks often complain that the rise of digital banking and lower foot traffic have hurt their chances to build relationships.
But banks are often missing easy chances to get in touch with customers. Doing so can be as simple as calling small-business owners and asking how the year is going and what their goals are, Miller said. Big news events like the Equifax breach also provide an opportunity for a banker to reach out, share information and remind clients to check on their credit.
“You can think of a dozen reasons why you might want to call a small business or an individual a couple of times a year to build a relationship,” Miller said. “The challenge banks and retailers face is engaging clients. If clients can do everything online, why talk to a human? When they do need to talk to a human, it is usually about more complex financial issues.”
Paul Davis contributed to this report.