NEW ORLEANS -- One of five bank branches will close by the end of the decade as consumers turn increasingly to cash machines, home banking, and other electronic delivery systems, according to a study released last week.

The analysis, sponsored by the Bank Administration Institute, found that 57% of banking transactions already take place outside traditional branches.

That percentage is expected to increase significantly over the next few years, even using the most conservative growth assumptions, said Gene Lockhart, executive vice president at First Manhattan Consulting Group, who directed the study for the institute.

Regional Difference

The study's conclusions were based on transactions from more than 35,000 accounts at 10 major banks, including Citicorp, Chase Manhattan Corp., Ba One Corp., and Norwest Corp.

The findings were presented to attendees of the institute's Retail Delivery Systems Conference here last week.

Mr. Lockhart noted that while the study predicted a 20% decline in the number of branches nationwide, it also found wide variance by region.

The Midwest is relatively underserved by bank offices, he said.

"The shift to nonbranch usage will continue, although the pace will vary by consumer segment," Mr. Lockhart said.

He noted that the study found that older, rural, and small-town residents were the most avid branch users, while younger, urban bank customers preferred cash machines, telephones, and computers to conduct their financial business.

Roles Changing

"Banks must find better ways to serve their [branch-averse] customers," he said.

"They must find better ways to sell products and better methods of delivering their services through electronic delivery channels."

He was quick to note that branches "are not going away" completely, but the roles they perform will change dramatically.

Today, the study found that branches' primary function is routine consumer transactions like deposit-taking, but by 2000, customer sales and service, as well as servicing commercial accounts, will predominate.

The report concluded that financial institutions must improve their ability to track demographic and behavioral patterns of customers to fine-tune their delivery systems, and to provide multiproduct pricing of bank products.

Part of the problem is that most banks' management information systems are not geared to look at total customer activity by household, evidenced by the difficulty the 10 banks that participated in the study had giving complete transaction histories on their customers, Mr. Lockhart said.

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