Within the delivery mix, we now know that branches are here to stay, contrary to yesterday's conventional cyberwisdom. Nontraditional branches continue to gain favor, representing 14% of all branches in 2000, compared with 10% in 1995, as banks seek retail efficiencies and selling power.

These unorthodox branches - found in stores, office buildings, malls, airports, and other locations - are or should be effective customer-acquisition platforms. In fact, getting customers is essentially what they are all about. But most of these branches are not realizing their potential, and more often than not faulty execution is to blame.

Bankers who achieve ambitious sales goals at nontraditional branches are, well, nontraditional. They recruit retailers and teach them to be bankers. They market aggressively and imaginatively. They embrace incentives and generous payouts for producers. They free staff from operational activities so they can concentrate on sales. They don't scrimp on resources that build the business and motivate employees, and they earn the respect and cooperation of their host stores.

RECRUITING

The best of these branch programs have experienced retailers on staff. Even after two decades of deregulation, most banks still aren't fertile ground for sales talent, and nontraditional programs succeed more often with recruits from the retail and hospitality industries. At U.S. Bancorp, of Minneapolis, one of its top in-store managers previously managed a restaurant, where he became accustomed to supervising people in a distracting environment and unconventional work shifts.

The price of poor hiring often includes failure to meet goals, frustration, blame shifting, and high turnover. One bank eliminated private offices in its nontraditional branches because its employees were "hiding" in them. While branch configuration is important, the bigger issue in this instance, I suspect, was a failure to hire the right people. Retailers want to interact with customers, not hide from them.

MARKETING BY THE HOUR

Like the restaurants from which it recruits, U.S. Bank's supermarket branches promote products by time of day. They market certificates of deposit, annuities, and mutual funds in the morning, when retirees tend to do their grocery shopping. In the late afternoon, when younger professionals are apt to stop in, they switch to auto and home equity loans. Such agility is quite a departure from the seasonal approach to marketing in traditional banking.

Rewards programs are helpful, if not necessary, in marketing. Another Minneapolis company, TCF Financial Corp., stacks incentives on incentives for in-store branch managers who meet and surpass monthly goals, rewarding them for tallying $2 million in net new deposits and for every 1,000 net new checking accounts. The faster they reach the target, the bigger the prize. When the branch reaches lower but nonetheless commendable milestones, every staff member gets a payout.

Supermarkets are also getting a payout from hosting well-run in-store branches. Supermarket managers are accustomed to value-added sales promotions from the marketing giants that sell products in their stores. In-store bankers help themselves by presenting the bank as a partner, not just a tenant.

TEST AND TEST SOME MORE

Entrepreneurial by nature, the drivers of nontraditional delivery systems will experiment over and over with all aspects of the model. As I write this, they are coming up with new looks, new locations, and new structures. Some examples:

New looks: Chicago's Bank One has converted some of its in-store branches into "One to One Centers" where all cash transactions are handled electronically, freeing employees to sell and consult. Washington Mutual's Occasio branches offer concierges, coffee, reading material, and children's play areas. In Atlanta, Bank of America Corp. is experimenting with three nontraditional models.

New locations: U.S. Bancorp's U.S. Bank has 10 branches at Procter & Gamble plants, and even one at Churchill Downs, best known for the Kentucky Derby but a year-round operation with 3,000 workers. E-Trade Bank is putting branches in Target Stores. Expect more branches in office buildings, casinos, retirement homes, and all manner of "big box" retailers.

New arrangements: Some banks are using the host retailer's name, either at the retailer's insistence or to leverage a recognized brand in a new market. Inside Loblaw's Supermarkets, Toronto's CIBC Bank, part of Canadian Imperial Bank of Commerce, calls itself President's Choice Financial, after the Loblaw private-label brand. CIBC's U.S. subsidiary, Amicus, operates as Marketplace Bank in Winn-Dixie stores and as Safeway Select in Safeway stores.

Nontraditional banking, an infant in 1980 and a precocious child in 1990, has earned a place at the table among bankers and retailers. Its evolution and growth will continue, driven by retail's linchpin role in bank profitability.

Mr. Holmes is the president of National Commerce Bank Services, in Memphis, a National Commerce Financial Corp. subsidiary that provides consulting on in-store and other retail banking programs.

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