Boca Raton, Fla. — Bank customers are making fewer regular visits to their local branches, which aren't getting cheaper for banks to maintain — but bankers are sharply divided on how to fix their branch problems.

Raymond Davis, chief executive officer of Umpqua Bank, and Brett King, founder of the yet-to-be-launched mobile bank MovenBank Corp. Ltd., offered two different possible solutions on Sunday afternoon, when they faced off with back-to-back speeches at a retail banking conference.

King, who recently founded a branchless online institution, regularly predicts the demise of physical bank storefronts. But Davis argued on Sunday that, while branches need a facelift, they will remain an important part of the bank customer experience.

"Branches are always going to have a place. The question is, What is it? We're trying to … sustain the relevancy by changing it," Davis told American Banker in an interview after his speech on Sunday.

But he admits that the traditional branch model has had to resort to some very untraditional tricks to stay relevant. For example, Umpqua's branches often host activities including yoga classes and video game sessions to attract customers.

King agrees that customers say they still want physical locations — without realizing that they just don't use them.

"If you ask someone, 'Do you still want a branch?', they'll say, 'Yes,' because the psychology of banking is, 'If I have a problem, I still want to know there's someone I can talk to or somewhere I can go'," Brett King told American Banker after his speech on Sunday.

"But from a behavioral perspective, they're not visiting branches, so this is the problem…. Their behavior isn't supporting the economics of branch banking," he adds.

King designed MovenBank's mobile focus to address this changing consumer behavior.

"If you were designing a bank in five year's time based on mobile being dominant and this behavioral shift having taken place, how would it work differently?" he says. "The physical location [won't be] necessary for this new generation of customers."

He told attendees during his speech that a beta version of MovenBank is slated for June or July of this year, with a public rollout possible in the third quarter of 2012.

But King was still in the minority at the conference, which was attended by retail bankers from many more traditional financial companies.

Umpqua's Davis, for example, argued that the brick-and-mortar branch has a vital role in maintaining consumer loyalty. At least in the immediate future, he says it would be impossible to engender the same kind of loyalty without branches.

"Right now, no. Eventually yes, but I don't know what that looks like," says Davis, while conceding that "nobody should be sitting still" when it comes to online and mobile innovation.

Umpqua, which is often lauded for its high consumer satisfaction, has taken a retail-store approach for years. And on Sunday, Davis emphasized the importance of face-time for customers.

"If I am a banker, I think that the best way to generate as much business with you as I can is face to face. 'Let's sit down and talk,' and I'm really good at showing you stuff, so I know you'll pick a couple more things," he adds.

He said in his speech that when he was revamping Umpqua's strategy he eschewed the advice of bankers and bank consultants, opting instead to look across industries to see what companies inspired real loyalty.

"What if, like Nike or Apple, we created an environment that drew customers back into the store to browse, making it easier for them to ultimately interact and ultimately purchase our services?" Davis said. "If you don't think they're going to go online after they come into your store, you're wrong."

But King says that while Umpqua's focus on customer service is laudable, it will be difficult for other banks to replicate.

"They've had to work for years to change the culture and change the skill set. You can't take a branch and make it a coffee shop or yoga center and have tellers that are still behaving with the same systems they've always had, and that think that overnight the groundswell of support is going change from your physical places. You really have to change the culture. And that's the tougher thing," says King.

The annual Best Practices in Retail Financial Services Symposium was sponsored by American Banker and its publisher, SourceMedia Inc.

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