Branches may not be disappearing any time soon but they are certainly likely to shrink.
As customers increasingly migrate to electronic transactions, in preference to branch visits, banks are experimenting with the “mini-branch,” an office that offers all the functionality of a full-service branch at a fraction of the per-foot cost. Many of these smaller branches utilize the latest in technology to service customers’ basic transactional needs, which frees up staff to assist with more complex issues or product sales.
“It is imperative for many banks to reduce their branch footprint,” says Robert Meara, senior analyst for Boston-based Celent, part of the Oliver Wyman Group. “In some markets, the big branches are empty. And banks find they can gain added market presence for 10 cents on the dollar with mini-branches compared to traditional branches.”
Supplement Not Replacement
Most banks looking at mini-branches view them as supplemental outlets enabling them to establish a presence in areas that lacked enough space or enough foot traffic to justify a traditional branch. “This gives us another option to explore in addition to full-service branches and in-store branches,” says Jonathan Velline, head of ATM and store strategy at San Francisco-based Wells Fargo & Co., which opened its first mini-branch in Washington, D.C. in April.
“Our real estate team was bringing us locations with around 1,000 square feet in markets we wanted to be in,” Velline says. “We decided to take what we had been offering in 3,000 square feet and make it available in 1,000 square feet by taking our work flow and making it more efficient and using innovative systems. We expect to use this approach to complement our existing branch network.”
Using terminals that allow customers to convert paper checks into electronic images in the teller line has reduced the need for back-office processing in all locations, freeing up about 40% of branch space, Velline says. In the Washington mini-branch, Wells Fargo encourages customers to use self-service terminals for simple transactions, so that staff members can work with customers on evaluating financial needs.
While the bank is not currently using video conferencing to allow mini-branch customers to talk to investment or loan specialists located at another branch, it is exploring that option for the future, Velline says. Currently, customers requiring lengthy consultations meet with specialists in private offices located in the back of the mini-branches.
Chester Springs, Pa.-based Conestoga Bank opened a mini-branch last year to serve a downtown Philadelphia customer base. This year, it opened a second mini-branch in an affluent shopping center in suburban Wayne, Penn.
Conestoga has developed a special brand for its mini-branches: “BankWerx.” The mini-branches are about 1,000 square feet compared to about 2,000 square feet for the bank’s existing locations. “We are targeting younger customers who embrace technology,” says Ron Bernas, vice president of consumer sales.
A BankWerx site consists of three personal teller machines that allow customers to cash checks in whatever currency denomination they prefer. The centers also have a stylish sitting area where customers can talk to bank personnel about their financial needs or just relax with free coffee, water and WIFI connections.
Having personnel concentrate on signing up new customers rather than handle transactions has paid off for Conestoga. According to Bernas, new customer account signups are 200% higher at the first mini-branch than at other Conestoga branches.
While Wells Fargo and Conestoga are looking at mini-branches to supplement their traditional network, Raleigh, N.C.-based Coastal Federal Credit Union, a $2 billion institution, has replaced its existing 15 branches with fully automated mini-branches.
Coastal Federal uses a video banking system that allows customers to talk to tellers and banking specialists back at their headquarters. It also has three automated teller stations per location that include check scanners and receipt printers and coin dispensers. The centers are about 1,500 square feet. The credit union began testing the systems in 2005 and began to roll them out in 2008, achieving full conversion by October 2011.
“This has allowed us to build several new branches in locations where the volume was previously too low to justify a full-service location,” says a Coastal spokesperson. A few staff members are available at each location to instruct customers in using the terminals, but the credit union has been able to reduce the number of tellers from 74 to 36 and freed them up to work with customers on financial concerns that are not transactional, the spokesperson says.
Additionally, customers can be served from 7 a.m. to 7 p.m. every day, expanding availability by 84% for Coastal, which services employees of a number of companies in North Caroline’s high-tech Triangle Park.
Augusta, Maine-based Kennebec Savings Bank, an $800 million community bank, has installed four unmanned electronic banking centers encompassing 700 square feet in locations throughout Maine where the population does not warrant a full-service branch. The centers cost about 10% of that of a traditional branch, which typically take up 3,500 square feet.
“The population in Maine is spread out and we cannot justify full-service branches in some regions. We’ll use the electronic centers to capture traffic in more remote areas and keep full-service branches in the urban centers,” says Andrew Silsby, chief operating officer.
At the exterior of these branches, the bank has installed checking-imaging ATMs for both customers and noncustomers. But customers can also access an interior area where there is a comfortable lounge with Internet access and banking kiosks. The centers are open 24/7.
Kennebec is in discussion with its ATM and kiosk manufacturer, NCR, about adding video conferencing at the electronic centers. Currently, customers can access bank personnel via computer chat.
Ms. Giesen is a contributing writer to BAI Banking Strategies based in Libertyville, Ill.
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