While the debate about prospects for the branch rages, evidence grows that population trends, economic realities, and marketing imperatives are combining to ensure that bank branch offices will not become dinosaurs, as some analysts have suggested.

On the contrary, increased consumer diversity and the services they will demand will prompt the evolution-not extinction-of the branch.

Despite much talk about a computer revolution leading to a "checkless society" and "paperless office," neither has emerged. Several industry studies have predicted that computerized banking is 20 to 25 years away from full consumer acceptance.

Research in 1995 by First Manhattan Consulting Group found that customers who prefer more automated delivery methods are not necessarily the most profitable. The study showed that these customers generate only an estimated 20% of a bank's income and comprise only 10% of all retail accounts.

So if the branch is not disappearing, how will it evolve and remain relevant in meeting consumers' needs? I think the answer lies in several emerging banking industry issues.

The first is population diversity.

Among the demographic changes that banks must accommodate are the dramatic growth of Asian populations in certain parts of the country and an Hispanic population that grew at four times the national rate through the 1980s. According to the Bureau of Labor Statistics, by 2000 nonwhite and Hispanic Americans will comprise 28% of the population. By the middle of the 21st century, these groups are expected to make up 50% of the U.S. population.

Beyond ethnicity, banks need to consider the needs of an aging population with more money to spend and time to spend it in. From 1960 to 1990, the population of Americans older than 60 doubled; it now comprises 12% of the total. The youngest segment of this age group controls the largest share of our country's wealth.

In the 50 to 60 age group, many are victims of downsizing and now live less hectic, home-based lifestyles that allow more time for visits to a branch where they have formed a bond with bank employees.

And the reality is that consumers are still coming to the branch to deposit checks. As many as 48% of checking customers do business both by automated teller machine or on-line banking and through the branch, and 40% only use the branch, according to the First Manhattan Consulting Group study.

The branch will always be essential for dealing with errors, nonroutine transactions, and loan applications. Branch visits are especially popular with small-business owners who drop in as often as once a day to deposit cash receipts and fulfill other needs, such as for currency and coins.

And banks will create new reasons for consumers to visit the branch, which will strive to become a center for productive revenue by promoting true financial services and products rather than simple transaction services.

At the same time, the branch must become more of a center for marketing excellence-inquiring about the customer's needs and preferences and applying this knowledge to the development of services to be made available at each point of entry-branch, ATM, personal computer. These capabilities will also make the branch a more valuable link to the head office for product development.

In addition to innovation within, branch infrastructure must change.

Some banks are piloting the shared real estate concept by building branches within grocery and video stores, dry cleaners, movie theaters, and hospitals. With cost efficiency a key motivator, the size of the bank branch will gradually decrease to a maximum of 2,500 square feet. With less money invested in fixed-cost real estate, the branches that win in the marketplace will be those that reinvest these resources in improved marketing and customer service.

The skills of branch employees will also need to be of a new and improved caliber. For example, the traditional bank teller should be transformed into a well-informed salesperson who advises, makes suggestions, and shows a genuine interest in customer needs.

Part of the reason banks need better educated and more proactive employees is to meet the needs of a more highly educated and discriminating work force. By 2000, more than half of all U.S. adults will have some college education.

Successful banks will be those willing to invest in making their branches more adept at delivering the human side of banking services to an increasingly diverse population. Eventually, phone and computer channels will coexist as productive and profitable expansions of branch services rather than replacements for the branch itself.

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