In-Store Branches May Survive Brick-and-Mortar Exodus

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A phone call last week from a business reporter at a metro newspaper gave me an opportunity to revisit one of my oldest soapbox topics. That topic is the role in-store and other "alternative" branches presently play in banking and what the future holds for these branches.

The impetus of the call was that a bank in this reporter's market had recently announced that it would be closing a dozen or so in-store branches.

He shared the short list of reasons the bank gave him for why it was closing most of its in-store locations and asked if this was an ominous sign. Are in-store branches going to be a casualty of the migration of customers to electronic and self-service channels?

Nothing on the list he ticked off surprised me, besides how familiar that list sounded to one I may have heard ten years ago. My new reporter friend told me that the bank's in-store branches are not seeing the traffic that their traditional branches are.

I asked him if he would define "traffic." Were they talking about the number of teller transactions handled by a branch or the amount of customers actually entering their buildings?

He told me, "Oh. I didn't think of it that way. I assumed that the bank was referring to traffic as teller transactions at a branch." I assured him that his assumption was correct. That was what they were looking at. And maybe, just maybe, they were looking at the wrong things.

Before pontificating just a bit, I made sure to tell him that I assume that the decision made by that bank was the right one for it. Folks typically don't get in a position to run a bank without knowing what is right and what is not for their institution. And what's right for their bank may or may not be right for another.

I've sometimes offered a hypothetical scenario to banker groups to help make that point.

Let's assume that it were possible to decipher the optimal number of branches for any bank in one particular market right now. Assume that number is 10. Bank A currently has 5 branches in that market and Bank B has 15. Optimizing their network is going to look extremely different for these banks as they get to that number. And pundits would almost assuredly question each bank's thinking as they move in the "opposite direction" of the competition.

Granted, that's an oversimplification, but I believe the point is valid. The right decision for one company may look entirely different than the right decision for another.

I suggested to the reporter that there may be any number of arguable reasons why that particular bank chose to exit those stores. Maybe retailer relations had soured. Maybe the bank had chosen to strengthen the standing of existing traditional branches by "rolling" the in-stores' accounts into them. In-stores are easier and cheaper to get into – and out of.

But I asked him to pay attention to whether or not those bank spaces "stay dark." I'd confidently bet that another bank with a different take on the future of in-store locations will be coming in soon.

It's been my experience that the closing of in-store branches generates more chatter than the fact that another bank often immediately opens and prospers in those exact spaces.

One final point I hoped to make was that, if any bank claims that face-to-face interaction between customers and bankers is critical to their long-term survival, what's their plan? Our traditional branches provide friendlier atmospheres and better customer service than they ever have.

Yet customer traffic into these branches falls each year. And it's hard to smile, shake hands and look people in the eye when they aren't in your buildings anymore. People increasingly shop for everything from shoes to insurance to homes online.

Do we really expect that banking and financial services are somehow inoculated from this reality? Not really, but, if I had to place a bet on any type of business to maintain customer traffic in an increasingly online world, it would be grocery stores. Perishable food item purchases are not likely to go the way of books or shoe sales. People won't download bananas or have bread mailed to them. They'll continue to physically frequent these stores.

The value of in-store branches is no longer simply about being a lower-cost, convenient branch. Remember, customers increasingly choose not to use a branch at all. But in-store and "alternative branches" give banks a chance to differentiate themselves with personal interaction and face-to face marketing in an increasingly online world.

In-store and on-site branches are becoming the human interfaces of online operations.

And that's a combination more and more customers – and bankers - are attracted to.

Dave Martin is an executive vice president and chief training consultant at NCBS, a SunTrust Banks Inc. subsidiary that offers consulting, training, design and construction services for retail banking programs. He can be reached at

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