The Spark that Led to a Branch Reinvention

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For Evans Bancorp, a potential tragedy turned into a source of inspiration.

One of Evans' 14 branches was gutted by a fire last year. From the ashes, the Hamburg, N.Y., company has created a prototype for its vision of the branch of the future.

Evans had been mulling a strategy of retrofitting some existing branches as "financial centers," featuring newer technology to enable sales and consultative services instead of the transactional focus of traditional branches, said David Nasca, chief executive of the $909 million-asset bank. After spending more than $1 million — using insurance money from the fire to help defray the costs — Evans opened the reimagined branch last month.

The reborn office is an example of the way some community banks are investing in branch technology as a way to differentiate from the big bank. And while common sentiment may say the bigger — and richer — banks are better positioned to pursue these type of branch transformation initiatives, Nasca believes the opposite is true.

"Because we're smaller, we don't have 8,000 branches we need to retrofit," he said. "We can compete because of the scale."

Nasca said that as Evans began noticing declining foot traffic in branches for basic transactions — many of which have migrated to digital channels — it wanted to focus on smaller locations, more tailored to the needs of customers. And so Evans' new branch largely does away with the traditional teller line, instead featuring universal bankers with tablets who can engage with customers. Last week the branch rolled out an "interactive teller machine" that can perform functions of a traditional ATM while also allowing customers the option of interacting with a remote employee for further assistance via video.

The "ITM" as it's known, is a product of NCR Corp. More than just a video chat, the remote teller (who controls the machine) can do things like cash a check or disperse cash in denominations not typically featured at an ATM. This also helps the bank reduce operating costs by centralizing teller functions, and give customers faster transaction times.

There is also a "concierge desk" where an employee greets customers who walk in, and can quickly pull up data on customers to give them more personalized service. This helps those greeting customers to better direct them to the proper person for help or possibly even anticipate why they have made the trip to the branch.

"We were envisioning something more like a Morgan Stanley office than the branch you picture with the old-time teller window," Nasca said.

Evans is further examining what other existing branches might be candidates to be retrofitted in this manner, along with building new branches from the ground up with this sales-oriented, technology focus.

Smaller banks are in many ways more equipped for branch transformation projects, said Carl Snyder, director of industry value engineering for the banking practice at the software provider SAP. Evans didn't work with SAP on the renovation.

"Smaller banks can be more nimble because they tend to have simple and more manageable technology and infrastructure," he said.

Traditionally, community banks were able to stand out from bigger competitors by having locations in a town or neighborhood and personal relationships with customers who came into branches more frequently, added Snyder.

But as consumers come into branches less for everyday transactions, the focus is now about providing the experience consumers want when they do decide to walk into a branch. Snyder said this means investing in technology that "turns data into intelligence" and allows a bank employee to better serve a customer that walks in. Obviously, bigger banks are also investing in technology that enables them to serve their customers as more than just account numbers. But for community banks, which long have staked their identity on personalized service, this concept is vital.

Additionally, technology is such that smaller banks can pursue branch transformation projects without having to invest a crippling amount of money.

"There are cloud solutions that are really inexpensive that can help small banks deliver a personalized, customized experience when someone walks into a location," Snyder said.

Many smaller banks are using technology to create a personalized branch experience, said Jonathan Hightower, a partner in the law firm Bryan Cave's financial institutions group.

"In my experience with community banks, they realize the physical locations are still a key delivery channel," he said. "And they are using digital tools to enhance that experience."

The overall branch count in the United States was 93,283 at June 30, down 6.3% from June 30, 2009, per data from SNL Financial. Most of that reduction has come with the nation's largest banks shedding inventory, but many smaller banks have held steady, and even increased, branch numbers. Still, the branch remains an important part of the banking ecosystem, even if customers are shifting to digital channels. For instance, an Aite Group survey released last month showed that 73% of respondents who opened a new checking account between 2013 and 2014 did so in a bank or credit union branch.

One community bank, and client of Bryan Cave's, doing that is Pinnacle Bank in Elberton, Ga. Several of its branches have incorporated universal bankers, who can perform a wider array of services than traditional tellers, and also provide assistance to customers, said the Jackson McConnell, president and chief executive of the $644 million-asset Pinnacle. Some branches have incorporated video technology for interactions with remote employees.

Further, the bank uses technology to compete with larger banks on certain financial products. For example, McConnell said that traditionally if a customer walked into a branch seeking to take out a mortgage, it might take 70 to 90 days to close that loan. Now, using mobile and e-documentation technology, the whole process can be taken down to 14 days.

"We can sell that against anybody," he said. "For a small community bank, we're at a disadvantage from a mass-marketing perspective." Large banks "can always kill us with scale."

"We can beat them in the one-on-one relationship, but we have to use technology to create the experience the customer wants," he said.

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