Academic journal article ABA Banking Journal

The Branch Is Dead. Long Live the Branch!

Academic journal article ABA Banking Journal

The Branch Is Dead. Long Live the Branch!

Article excerpt

THE BRANCH IS DEAD. LONG LIVE THE BRANCH! In its latest incarnation, the monolithic bank branch boasts as many varieties as Heinz--from marble pillars to video kiosks

I used to be that when a customer walked into a branch, they pretty much knew what to expect: the usual products sold the usual way. knew what to expect, too. This relatively static identity prompted some observers to label branches a "wasting asset," doomed to become a costly burden to banks that held onto them.

Time has shown that view to be extreme. Many branches have indeed been closed, but mainly as a result of acquisitions. Many others--some quite traditional--have been opened. Still others have been reconfigured with some surprising twists added to the mix. More than anything, branches have emerged as a changing asset, becoming more in sync with banks' changing business strategies.

"What we're seeing is a much more thoughtful and rationalized approach to product sales and distribution," says Christopher Formant, chairman of the national banking industry group at Coopers & Lybrand in Baltimore.

Examples of this rationalized approach are seen in the increasing number of banks carving out their niche in supermarkets and doing it in ever-shrinking spaces. While face-to-face sales are still the norm, sometimes those faces appear over interactive video monitors in all-electronic branches. The renewed emphasis on sales and service sparked by gains in database marketing have launched the start of boutique branches targeting specific customers such as small-business owners or affluent investors. At the other end of the spectrum are branch superstores where products and services run the gamut from customary loans and deposits to investments and insurance.


In attempting to better meet customer needs and reduce their own costs, many banks are appropriating tested business practices from conventional retailers. From employee training to automation to design, banks are reaching customers with new techniques and strategies that for some have turned in exceptional results. Not to mention the enormous cost savings compared to full-size, full-service branches. From the ground up, a traditional branch today can run at $1 million or more whereas the bill for a 300-sq. ft. in-store branch is typically around $300,000.

A high-performing in-store branch also pays for itself faster, usually within a year compared to three to four years for a traditional brick and mortar facility.

At the Bank of Bentonville (Ark.), retail precepts come from the top--the very top--where the bank's owner, the Walton family of Wal-Mart fame, sits. The late Sam Walton "definitely brought in the flavor of outstanding customer service," says Sharon Stucky, the bank's senior vice-president of operations. "That's our first and foremost priority."

To show just how serious it is, the bank compensates customers for employee errors with a $5 check and a personal letter. Hiring policies strictly require outgoing friendly personalities as well as efficiency. "We make a point to know customers' names," Stucky says.

As it re-engineers its network of some 60 branches, First Hawaiian Bank in Honolulu is also strengthening its retail focus. "We have spent too much time worrying about the branch instead of worrying about the customer," says vice-chairman Don Horner. "The real issue is, is the customer changing? And if so, how can we better serve him and what facility can we use to do it?"

First Hawaiian thinks it has its answer. Traditional branches will gradually fade in favor of either limited-service in-store locations or banking centers with a wide range of sales and service options. An important element of the physical reconfiguration, Horner says, is better use of space. "Go to any average branch, and you'll see 50% of floor space dedicated to operations," he says. "We want to change that to 75% sales/25% operations, and eventually to a ratio of 90%/10%. …

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