PHILADELPHIA -- Mellon Bank Corp. isn't in the science business these days, but the bank does have a laboratory where an experiment is taking place.
Near here on the edge of sprawling Franklin Mills Mall, Mellon has redesigned a former supermarket to be a one-stop shopping center for financial planning.
The timing of this banking laboratory - dubbed the Mellon PSFS Personal Financial Center - is not coincidental. Mellon will soon complete its acquisition of the Dreyfus Corp., the nation's sixth-largest mutual fund company. Mellon hopes branches like this one will be critical to boosting fee income and earnings.
Can't Do It All
Analysts say these specially designed branches and the addition of Dreyfus' 135 funds could position Pittsburgh-based Mellon to compete with other Pennsylvania institutions peddling investment products. They say special services centers could be the wave of the future for smart retail banks.
"Banks have learned that you can use the traditional branch with lots of routine transactions to cement relationships, or you can customize your offerings to the segmentation in that area," says Joe Belew, president of the Consumer Bankers Association. "But they are realizing that you can't continue to have all your branches offer all your services."
That is what Mellon has in mind. Even though the Franklin Mills branch will originate loans and offer checking and other traditional services, it was opened last month in anticipation of the day the $37 billion-asset bank will sell everything from mutual funds to insurance to customized financial planning.
Dean Witter Reynolds Inc. banking analyst Anthony Davis believes the concept will be more successful than Mellon's 29 supermarket branches. "We're not talking about a loan next to the cabbage shelf," he said.
Mellon executives agree, saying that its financial planning center is designed to sell investment products and advice.
Here's how it works. The 5,200-square-foot branch has the usual automated telephone banking services and an ATM for self-service, but it can also meet the needs of those who want to talk to an investment counselor about planning for retirement or investing for their kids' college education.
The branch is divided into four areas: home and family financing; retirement saving; career planning; and money management and investing. Each area is a 21st century-style pod, with glossy poster-board marketing displays about that section's services.
Inside the semprivate pods, customers can work with a Mellon counselor to crank out a personal financial plan on a computer. For those with more specialized needs, the bank plans to install interactive video so customers can talk with a loan officer or investment counselor for quicker same-day service.
Designed for Customers
Paul Beideman, president of Mellon's Philadelphia bank, says the traditional bank branch layout was too distracting and did not provide enough privacy for customer to sit down with a counselor and talk about retirement planning or setting up trusts for college education.
"Customers are often uncomfortable discussing those ideas in that setup," Mr. Beideman says.
In adopting the style for its new branch, Mellon appears to have copied those of major mutual fund companies. Fidelity Investments, for example, has its own street-level offices in major cities designed to attract customers passing by on their lunch hour.
"It sounds like it competes more with Fidelity than it does with another bank," said Mr. Belew.
But not every one applauds such a strategy. Denis Laplante, an analyst at Fox-Pitt Kelton, isn't impressed with Mellon's new branch. "I don't see it as particularly unique," he says. He also does not believe Dreyfus will bring much advantage to Mellon.
"There aren't too many banks these days that can't offer mutual funds and annuities," he says. He does admit that if this branch of the future works, it could mean Mellon will pare down its 428 branches in Pennsylvania, Delaware, and Maryland.
The Franklin Mills branch is distinct for Mellon in that it is in a residential area where passersby are mostly shopping at neighboring stores, and not in a busy central business district.
Mellon executives point out that while its typical depositor tends to be between the ages of 40 and 50, the home and design stores at the Franklin Mills Mall usually attracts young homeowners under 45. And, with weekday hours until 8 p.m., and weekend hours until 6 p.m., the branch is designed for afterwork convenience to attract the affluent people who live nearby.
When customers enter the branch, they are bombarded with glossy displays and television screens marketing Mellon products, all designed to lure depositors and newcomers to investment counselors.
"These days no one gets a job for life" read the huge, bold words on the front of the home and family module. The stark message, meant to induce customers to seek greater financial security through Mellon investment products, is emblazoned over a larger-than-life-size figure of a working-class man wearing overalls and a grim expression.
When customers make deposits, it is impossible to miss the bank's marketing as televisions above teller windows blare out messages about other Mellon offerings.
But there is more to this than Madison Avenue. Mellon can offer everything from its own mutual funds to a burgeoning private banking business bolstered by its pending deal for Dreyfus. The bank already offers its proprietary Laurel Fund family and hopes to offer Dreyfus' funds later this year.
"Every (banker) is sitting there going 'I'm losing deposits to mutual funds. I can either sell other people's ... or I can sell my own, which doesn't have a track record,'" said Brent Erensel, a banking analyst at UBS Securities.
Bruce Wheeler, executive vice president for Mellon's retail bank, said that even the May 1993 acquisition of the Boston Co., a money management firm, could benefit from the retail side. While the Boston Co. has an institutional business, Mr. Wheeler said the experimental branch could get referrals for the trust business of wealthier clients.
"If you can blend that into that technology-driven format, you really are doing something that's very exciting and I think that's really where they are shooting," said Mr. Davis, the analyst.
Though the financial planning center is part of the bank's strategy, how the Franklin Mills branch came about was accidental.
Today the branch is in its own building, but it used to be inside the 200,000-square-foot French-owned supermarket, Carrefour, located on the other side of a giant parking lot. Carrefour closed in January. Mellon had until this summer to find a new home for the $10 million of deposits it held in its Carrefour branch.
The constant flow of customers in and out of the Franklin Mills Mall was too good to give up. So Mr. Wheeler chose to extend Mellon's supermarket concept.
Though the branch is only a month old, he expects, "There will be quite a few of these facilities evolving [across Pennsylvania] in the next 12 months."
But that strategy is not likely to leave competing banks quaking. Pittsburgh-based PNC Bank Corp. is no newcomer to the money management business, with billions in its own mutual funds and a full-service brokerage expected soon to expand to 500 brokers.
"We have a very, very big position in the mutual fund business, which has been going on more than 20 years," said PNC spokesman Jonathan Williams.
Philadelphia-based Core-States Financial Corp. has investment advisers in several locations, bolstering its own reputation as a solid retail bank.
It's not clear if other bankers will follow Mellon's model. To be sure, most banks have some kind of experimental "branch of the future" in the works. Some are largely technolgy driven, boasting kiosks with interactive teller monitors, while others try to integrate the latest in personal banking services. Citicorp's Park Avenue branch in midtown Manhattan, for example, has a concierge to greet customers.
But few come as close to melding automation with personal service successfully. Experts like Mr. Belew say most banks are simply replacing tellers with technology to cut costs in an era of intense competition.
"Bankers perceive that they've got these incredibly expensive branches and they're trying to figure out what to do with them," said the Consumer Bankers head. "Only time will tell who succeeds."