THE SUPERMARKET HAS AN important, but not exclusive, role in the distribution of financial services to America's households. It probably fits in somewhere between traditional branch banking, which is clearly shrinking in terms of the numbers and frequency of people using it, and telephone/home banking, which is clearly on the rise. There still is the need for people to go to the bank to exchange physical documents, to obtain change, and to make deposits. Therefore, the physical presence of a bank is still necessary. We're happy with our 25 supermarket banks. We have about 179 other branches. Our program represents the highest ratio of grocery store branches to a total branch system in the California market by far. Our program has continued to grow at a good rate in all stores. The profitability has been about what we expected. When interest rates were real low, the profitability was less than we expected but it's improving because there is a lot of deposit spread in the business.

ONE OF THE ISSUES WITH supermarket banking is that many banks don't go into a supermarket banking program with a clear perspective and set of objectives. Banks are changing their delivery systems from what is essentially a brick and mortar branch delivery system to a series of multiple delivery systems that need to work in concert. Most haven't thought through how supermarket banking fits into that overall structure. Because there is no clear set of objectives, you will probably see supermarket banking go in a number of directions.

I THINK SUPERMARKET BANKING HAS got great potential. The interest in participation is probably equal to what we've seen with automated teller machines and the acceptance of point of sale in supermarkets. The problem is that space is so dear in supermarkets. Banking is probably only going to take place in stores that have been built with banking specifically in mind.

I don't know what the rate of turnover is in new supermarkets. I suspect it is fairly low. I think that we will see a growing and significant percentage of new supermarket facilities being built with provisions for supermarket banking. My sense is that superstores, the giant supermarkets, will be the most likely candidates for supermarket banking facilities.

I THINK THE FUTURE FOR supermarket banking is bright. Three concepts are going to be overwhelmingly popular for the consumer in the future: bank where you work, bank where you shop, and bank by phone. Those three areas are going to have long and substantial histories of being good places to do banking. A supermarket is unique because it is the only place where you see all the customers that make up a household engaging in their weekly activities. At work, you may see one customer; on the telephone, you see none; but in a store, you see all the members of the family that bank with you. It's a major relationship-building opportunity. It's going to be the only place where you have - to some degree - small-town banking in a rat-race world.

THE FUTURE IS BRIGHT. MORE AND more supermarkets are looking to be one-stop-shopping opportunities and banks figure prominently in the mix. I would say the opportunities are out there. Combination stores, or what some people call superstores, are combined food and drug stores. These places are the most likely ones to have the space for a bank. Kroger in Memphis has been pretty aggressive for several years and stands out in my mind as a good example.

THERE IS A FUTURE. ESSENTIALLY, the more a bank can get out to the customer, where the customer is going to be, the better. Consumers are looking for more. Being able to use banking services where they are going to be and not having to make a special trip is plus. I'd prefer to have something like that rather than having to make one or two stops. I think there is going to be a real acceptance among consumers regardless of their age. I know there is concern that older people won't accept [supermarket] branch banking, but I don't think that is true. Supermarkets are less intimidating than a bank.

OUR ORGANIZATION IS PRETTY excited about supermarket banking. We are now in the process of opening up our fourth location. I'm not sure if it's the right strategy for everyone. But for us, as a way to enter a new market, it works. We were able to put in three locations in a new market far cheaper than what it would have cost to put in a traditional branch.

We're also pleased with the delivery system. With a supermarket bank, you get to see customers or people who aren't your customers. Depending on the city or location, you may see anywhere from 10,000 to 50,000 shoppers frequenting a store. With a supermarket bank, you have access to people who aren't your customers and that gives you an opportunity to interact with them.

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