Archive for the ‘Delivery Channels’ Category

Is there a trend towards fewer but fancier bank branches?  An article in today’s American Banker suggests that there is, at least among some institutions. The article, titled: The New Bank Branches: Fewer But Fancier, discusses the efforts of some regional and national banks as they take steps to reposition some of their branches – namely those in high-growth or more affluent markets – as places that are more conducive to conversations and relationship-building with customers.  The decisions are driven, at least in part, by dwindling regular branch foot-traffic:

As walk-in traffic declines, experts say, making customers feel as welcome as possible is central to post-recession growth plans at certain banks. Consumer research indicates that people still want to go to the bank from time to time to open up a new checking or investment account. But they don’t need to wait in line to deposit Friday’s paycheck.

The article goes on to cite findings from a study conducted in July by consulting firm, Celent:

Bankers said that foot traffic is falling at branches and that they expect the trend to continue. Respondents said that branches will still be necessary in five years, but they anticipate that their footprint will need to be 10% smaller by 2015 and feature 20% to 30% fewer teller stations.

While “fancier” may not be the best word to describe these changes, the article draws attention to an important point: Rather than try to increase foot-traffic, which would be a lost cause in most cases, these institutions recognize and are adapting to changing consumer preferences and behaviors.  They realize that consumers still need branches, but don’t necessarily need them as often or for the same reasons as they did in the past.

As consumer behaviors change, delivery networks should change as well.  In many cases, the branch has been ignored as institutions have adopted and introduced new technologies like mobile banking, remote deposit capture and online banking.  But remaining relevant requires that the branch network reflects these changes as well.


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We’ve heard quite a few stories this year about institutions opening branches in local high schools as means to better serve and attract younger consumers.  When I read an article about Bucks First Federal Credit Union’s ($88 mil. / Bristol, PA) Palisades High School branch in Kintnersville, PA opening last week, I didn’t think much of it.  But I was intrigued by the photo of the branch included in the article – namely, the paint splatter behind the teller line.  A quick search revealed that Bucks First FCU has an extensive Generation Y initiative despite the fact that it only has two branch locations (other than the high school branch).

The initiative is called Project: Flipside, with the tagline “the alternative to doing nothing”.  There’s a great corresponding website: www.projectflipside.com complete with a blog, contests, events, financial education (cleverly positioned as ‘the alternative’), and a savings/checking account appropriately named the flipside account.

The website is simple and straightforward, and a welcome relief from the flashy and often times overwhelming websites that we’ve become used to seeing in efforts to target Gen Y.  This site comes across as authentic – written by people who are somewhere between 16-25 for their peers in the same age group. 

While there are some similar elements to this campaign as we’ve seen with others (i.e.  a branded car that visits sponsored events, a contest to select representatives of the campaign/spokespeople, and Facebook/MySpace/Flickr links), there are some interesting and different points about this effort worth noting:

  • There are three representatives for Project Flipside – known as the ‘crew’
  • The blog posts aren’t limited to financial advice, tips or product related information.  This blog includes a variety of topics from funny random videos to some that hint at financial related material.
  • The site has an easy contest for a $25 gift card: simply submit your name and email

Perhaps the most interesting aspect of Project Flipside is the ‘Flip your Fees’ classes that are offered to customers where any overdraft fees during the course of a month can be reversed simply by attending a class offered by the Credit Union.  It’s a great idea: there’s incentive for customers to attend the courses (to reverse overdrafts), and the information will likely stick with them as a result.  People can even sign up for classes online (although the class schedule needs to be updated).

The tagline for the initiative is also really well done: “the alternative to doing nothing.”  Many of today’s younger consumers need to be proactive if they’re going to learn about personal finance.  While some do nothing, this tagline speaks to those willing to be proactive in their learning.

While I would like to see some aspects of the site updated – namely, the ‘flip your fees’ class schedule – and I’d like to see more events and blog comments,  overall, this initiative appears to be pretty strong.  The Generation Y ‘crew’, the website, the high school branch, the social media elements, the events, the contests, etc. all seem to be cohesive and integrated.  At the same time, none of these comes across as overly cheesy – something we’ve seen when institutions try too hard to be ‘cool’.

My biggest question here would be relative to the market selected for the high school branch – Palisades High School in Kintnersville is 40 miles from the nearest Bucks First branch and 70 miles from the main office.

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In a recent article, The Atlanta Journal-Constitution highlighted an aspect of failed bank acquisitions that isn’t usually given much attention: acquiring institutions closing one or more of the branches that were acquired from the failed institution.

As the article points out:

Most branches have remained open as they provide the acquiring bank with access to new markets. But a growing number of branches have closed down or been absorbed into a buyer’s existing banking network.

Most decisions to close branches have been made because of location: The newly acquired branches are too close to a buyer’s existing branches.

We often hear that ‘nothing will change’ and it will be ‘business as usual’ when we read about an institution acquiring a failed institution.  But, it’s easy to see why decisions to consolidate or close branches could be made due to proximity to existing branches in the network. 

At the same time, it seems that these situations should hold opportunity for other local institutions to tap into customers’ frustrations about the bank failure, the acquisition, and the subsequent closure of the branch or branches  – or, to expand their own branch network through the acquisition of the jettisoned branch or branches.

I’d like to see data about the attrition rates of failed bank customers (I’d expect the rates to be higher than in an acquisition under ‘normal’ circumstances), how many of these branches are jettisoned after acquisition nationally, and whether the failed bank customers would be more likely to continue banking with the acquiring bank after their branch closure – or perhaps switch to the institution that moves into that branch location.

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Earlier this week, BusinessWeek ran an article called The New Bank Branch: Internet Cafes and Rent-a-Rooms, highlighting Umpqua Bank as an institution with some innovative branches – complete with coffee, Internet, and conference rooms that can be rented out by community groups. 

The article includes comments from Bob Meara, senior analyst at Celent:

“the traditional branch, with Greek columns and steel vaults, will give way over time to smaller, sleeker, and more inviting branches intended for less deposit or check-cashing…”

We’ve certainly seen examples of the smaller and more inviting branches, one of which is Umpqua Bank’s neighborhood branch.   But, while we may see more of ‘smaller, sleeker, and more inviting branches’, it’s important to recognize that this approach isn’t appropriate for all institutions in all markets. 

This point is illustrated in the cover story from last month’s Bank Technology News – The Future of the Bank Branch.

In this article, Jeffry Pilcher from The Financial Brand makes a great point:

“Everyone in the fnancial industry is looking for a single blueprint, and it doesn’t work; it depends on who you are serving, what products you are offering, where you are located and the competition you face.”

Experimentation with the branch environment is not a new idea.  Examples that come to mind include:  ING Cafes, Umpqua Bank’s Innovation Lab, WaMu’s Occasio branches, Reliant Bank’s branches with Maui Wowi Smoothie Shops, or Union National Community Bank’s Gold Cafes.  

Are these innovative branch concepts really the future of bank branches?

As the BTN article points out: “Washington Mutual’s experiment in futuristic branch design-at a cost of $1 billion- has come to an ignominious end” as Chase converts the Occasio branches to the more traditional branch layout that is part of the Chase brand.   Read more about the WaMu/Chase branch conversion here and here

The BTN article also talks about ING’s Cafes, noting that they have ‘no transactional ability whatsoever.’ 

While it works at one location, it simply wouldn’t be practical for Umpqua Bank to implement the Innovation Lab concept at all of its locations.

Reliant Bank probably won’t offer smoothies at all of its locations.

And, Union National Community Bank has already killed the Gold Cafes, converting those branches back to traditional branches.

Looking at these examples can be discouraging for bankers who may be looking for the ‘single blueprint’ silver bullet that will create the kind of branch that people want to visit.  In reality, it gets back to knowing your customers, knowing your market, and creating a branch environment that fits with your brand.  For some, that may mean offering coffee.  For others, that may mean traditional teller lines. 

These examples may show us some cool and innovative ideas, but they also tell us that these ideas don’t always work out in the end.

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Last month, the Chicago Tribune ran an article with the headline: MB Financial chief Mitchell Feiger says it’s ‘very possible’ 25-30 Chicago banks could fail.


It’s a similar story in markets across the country.  Feiger discusses the national trend in the article:

“Say if 10 percent of banks in the country fail, which I think is a very possible number, and proportionally 10 percent of the banks in Chicago area fail, which I think is a very possible number, then 25 to 30 banks in the Chicago area will fail.”

 Feiger goes on to say “There will be more opportunities like this one”, as MB Financial was the acquiring institution of failed Heritage Community Bank.


Every week we hear about the latest banks to join the list of 20+ failed institutions since the beginning of the year.  And while the headline suggests trouble for some, it could present a series of opportunities for others.  


The challenge lies in the ability for executives and marketers to recognize and take advantage of local market opportunities.   While economic shifts impact markets differently, we are seeing opportunities for financial institutions to:


·             Reconnect with your customers

           How long has it been since you reached out directly to your current customers?  We’ve seen a lot of newspaper advertisements emphasizing safety and soundness, and we’ve seen some institutions post a message from the president on their homepage – but these offer indirect one-way communication.  Instead, write a letter, pick up the phone, or have an in-person conversation; connect with your customers, answer their questions, and work to deepen the customer relationship.


·             Deepen customer relationships

Many people hear the phrase ‘deepen the relationship’ and immediately think of cross-selling.  But consumers don’t want to be sold anything right now.  The opportunity here is not necessarily in selling more products, but in moving beyond product and working to create an emotional connection with your customers.  As your competition tries to attract your customers with advertisements and product promotions, you have the advantage of an established relationship – use it to your advantage.


·             Reestablish your competitive position

As players change in your markets, you have the opportunity to emphasize the points that make your institution different from the competition.  Tell people about your differences, demonstrate those differences and let them experience it first hand.  Now is the time to help people make the decision to bank with you – or help them decide that you’re institution isn’t right for them.  Either way, you have the opportunity now to differentiate from the competition.


·             Take advantage of customer churn

We know the players are changing and consumer uncertainty is high.  You may have the opportunity to take advantage of any customer churn happening in your markets as a result.  While advertisements and promotions may work to generate some awareness about your institution, you’re likely to have better success focusing first on deepening relationships with your current customers and reestablishing your competitive position in your markets.  Give your current customers a reason to talk about your institution.   Help people see the differences between your institution and the competition.  Your ads can support each of these efforts.


·             Expand your branch network

As financial institutions find themselves in trouble, opportunities arise for other institutions to expand their branch networks through acquisition of troubled bank branches.  The challenge here is making a decision to acquire based on the potential upside a branch location will offer your institution – and not simply because the opportunity is a good deal.  Think strategically and be proactive.  Define a series of parameters that will allow your team to make confident decisions about branch acquisition should the opportunity arise.


While many community banks and credit unions are focused on the immediate challenges brought about by the recent dramatic shifts in the economy, others recognize the opportunities embedded in those challenges to position themselves for long-term sustainable growth. 


Now is the time to take advantage of these opportunities.

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Since introducing its Gold Cafe concept in 2006, we’ve used Union National Community Bank ($492 mil) as an example in presentations and conversations dealing with non-traditional delivery channels.  Rather than operating as a traditional bank branch, Gold Cafe was positioned as a cafe – with knowledgeable bankers serving coffee drinks to customers, much like we’ve seen with the ING Cafes.

The Lancaster, Pennsylvania based bank’s initiatives caught the attention of many in the industry, and the concept made sense – especially as the first cafe-branch was positioned to serve the students and community around the Lancaster campus of the Harrisburg Area Community College.  Because of its location near the campus, we’ve used the Gold Cafe as an example in some of our presentations highlighting examples of how institutions are targeting younger market segments. 

In conducting some research for an upcoming presentation about Gen Y, I checked out the Gold Cafe website to see if any new developments had been made – and was surprised when the Gold Cafe url directed me to Union National Community Bank’s homepage.  Gold Cafe used to have its own website with information specifically about the cafe.  Now, the website isn’t available – and the UNCB homepage doesn’t link to, or make mention of the Gold Cafes anymore. 

So, what happened?  I can’t find any news online about the Gold Cafes closing, scaling back its operation, or reverting to more traditional bank branches. 

In August 2007, a little more than a year after opening the first location, Mark Gainer, CEO of UNCB, was quoted in the Central Penn Business Journal as saying “I think there is general acceptance of them” and went on to discuss one of the challenges being customer/commuinty perceptions in “There is a little bit of confusion – is it a coffee shop or is it a bank?”

Further digging lead me to a blog called the Coffee Shop Journal, where discussion about the Gold Cafe included the comment on October 14, 2008:

“My wife and I went in yesterday afternoon around 3:00. The coffee counter was dark and the coffee machines were all covered with plastic tarps. No one was behind the counter and the lights in the seating area were dark. Instead, on the counter were two of those metal coffee dispensers, one labeled “Regular” and the other “Decaf” with a small stack of paper cups beside them. On the specials board they had written ‘TALK TO A MANAGER ABOUT OPENING AN ACCOUNT TODAY.’ Not really the coffee experience we were hoping for.”

With aggressive competition in both the coffee space (think Starbucks, McDonald’s and Dunkin’ Donuts) and among local financial institutions, perhaps Gold Cafe is feeling pressures to emphasize banking over coffee.  This is likely compounded by an economy where spending is watched more carefully.

So, what’s the deal with Gold Cafe?  If you live in the Lancaster area and/or have any additional information, we’d like to hear from you.

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It seemed like a no-brainer for some institutions’ expansion strategies: build branches near or adjacent to a Starbucks store; or better yet, take full advantage of the foot traffic generated by the coffee chain and share a retail space. Given the rapid growth and much-discussed success of Starbucks in recent years, it certainly seemed like a viable strategy.But as news comes today of

Starbucks’ plans to close more than 600 stores over the next year, how will financial institutions sharing space with Starbucks stores be impacted?While most of the planned Starbucks closures will be those stores opened since 2005, it doesn’t sound like the institutions referenced in this

Wall Street Journal article from 2005 will be impacted. But what about those institutions that may have followed their lead and teamed up with Starbucks with a shared-space since then? Or, what about those that were influenced in some respect by a Starbucks location when selecting a site for a new branch during the past few years? We’ve talked to quite a few institutions, especially those with branches near college campuses, who have aggressively pursued such partnerships with Starbucks.

It’s easy to see how the shifts in traffic patterns can certainly benefit many businesses, especially those that follow retail magnets like Starbucks or Wal-Mart, but what happens when they close their doors? I suppose we’ll find out which institutions, if any, will be impacted when Starbucks makes its announcement to its employees later this month about which locations will be closed.

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