Has the bank branch reached the end of the road?
Friday, July 31st, 2009
When I first went to work for Wells Fargo, one of the things that was hard to get used to was what they called their branches: “stores.” In hindsight, it made a lot of sense. Retail banks are called as such for a reason, after all. Most people think of branches as places to transact, but they’re very much retail environments, where brands are established (and refreshed), customers are profiled, and products are sold.
Around the turn of the millennium, the branch looked doom. Online banks with no physical locations were growing fast, and the traditional banks were building out their online capabilities.
Then traditional banks changed tack and doubled-down on meatspace. Major players built thousands of new branches to attract deposits, and some even radically redefined branches entirely. Umpqua’s wi-fi lounges (pictured above) and WaMu’s Occasio were particularly innovative. (Sadly, WaMu’s new Chase overlords are doing away with Occasio.) Commerce Bank grew super-fast with the simple innovation of extending their hours to times that were more convenient for working people.
But now Bank of America is retrenching, shuttering 10% of its branches. Does this mean the end of the store strategy?
Yes and no.
Yes: Retail (consumer and small business) customers are becoming ever more comfortable with online services. As they spend more time interacting with banks online, banks are finding more ways to market and sell through online channels.
No: America is over-retailed in general, and banks are no exception. BofA probably had too many branches to begin with. Other big banks that built out (or acquired) branch networks during the housing boom are probably now looking at their cost structure and finding many unprofitable locations. Shuttering may occur, but people will still want a physical location to transact checks, cash, and the other tangible forms of money that still power our everyday economy.
We can only hope that more of these banks will follow the Umpqua and Commerce models and create a branch experience that its customers don’t hate. Whoever does that will win deposits, and today, that matters more than anything.