With many banks shrinking their branch networks after the boom of the 1990s and early 2000s, and consumers warming to digital financial services, it’s fashionable in some circles to declare branches dead.
But for many community banks, branches remain an important delivery channel, and a reminder of their presence in local communities. According to figures from the FDIC, the number of community bank branches (defined as institutions with $10 billion in assets) slightly increased in 2016, while branches of all other banks went down by 2.3%.
While branches remain relevant to community banks, they still need to reflect the changing tastes of today’s customer, some say.
“We have many customers that like to do [transactions] on the mobile device, but still love to come in to a branch sometimes as well,” said Garrett Richter, president and CEO of First Florida Integrity Bank in Naples.
The $1.2 billion-asset First Florida has seen success in adopting the so-called branch of the future model. A little more than four years ago, First Florida acquired a small community bank in its area. It decided to sell the bank’s 11,000-square-foot flagship location, purchased a nearby 1,800-square-foot building and experimented with a technology-driven branch. Some elements bring to mind innovations from more than a decade ago by retail banks such as Umpqua, Commerce Bank (now a part of TD Bank) and the late Washington Mutual; others only became possible with the rise of mobile devices.
The bank, with the help of vendor Jack Henry, created the new branch from scratch, staffing it with three people as opposed to the typical eight, and putting in a greeting station and desks on an open floor plan instead of a teller line and tucked-away offices. Customers coming to this branch can conduct basic transactions on tablets, and speak to remote experts via video conferencing. It also has nonbanking accoutrements such as music piping overhead, televisions streaming the news, fresh cookies and cappuccino machines.
“It’s become our most popular location,” Richter said. “People drive out of their way to go there.”
In the four years it’s been open, that location has grown from holding $34 million in deposits to more than $135 million. The success led First Florida to recently convert another branch to this style, with plans for converting another in the near future. Despite focusing more on technology than people, Richter said, the location still retains the “community bank feel” that its customers enjoy. For example, the branch manager sits at a desk in the lobby and greets everyone who enters. And the extra amenities are also appreciated, he said.
“We’ve become known as the cookie bank,” Richter said.
Technology-driven branches also help the bank operate more efficiently, he added.
“It’s completely paperless,” he said. “We’ve got rid of legacy back-office paper processes. And customers never walk out with paperwork; everything is done digitally.”
In general, branches remain an effective marketing tool for community banks if they can be run in a cost-effective manner, said Ed O’Brien, executive vice president for the consumer research and consulting firm ath Power Consulting.
“People do like to be greeted and known by name; it can be a differentiator,” he said. “And most people want human advice when it comes to some financial issues. Even millennials, if they’re buying a house or looking at a more complicated financial product, want face-to-face advice.”
The key, he said, is to bring enough self-service to enable basic transactions in the branch, while allowing a smaller staff to do more consultative work.
“You can have someone with a tablet aided by back-office analytics who can offer a rich discussion on a financial product, and maybe that person can see on the screen a previous conversation from an online chat that the customer had so they can already have an idea of what the customer is looking for,” O’Brien said.
Still, there is no catchall solution to what the future of bank branches will be, said Lisa Woodley, vice president of customer experience for financial services at NTT Data Consulting.
“I would never recommend that all banks should do this café-style branch,” she said. “It may work for some and not others. Just getting higher foot traffic in a branch isn’t the goal in itself. You have to figure out what you want to be to your customers and what they want from you. Customer experience comes first, then go from there.”