Thetraditional bank branch — some 4,000 square feetand staffed with a team of tellers — just does not work in the modern age.
At least not in the large numbers of the recent past.
The U.S. banking sector finished 2015 with 92,997 branches, 1,614fewer than the previous year, according to a recent by SNL Financial, which is partof S&PGlobal Market Intelligence. It marked thecontinuation of a branch-reduction trend that dates to 2009 and that mostbankers think will continue for years to come. Customers increasingly arehandling most of their banking business online, diminishing activity inbranches and making more of them money losers.
And yet banks still need some physical locations. Customersstill want to meet with bankers for major transactions, and banks still standto benefit from strategically situated branches that serve as importantmarketing billboards in high-traffic areas. The result: Banks are closing somebranches and selectively holding onto others.
"There has to be a balance," said Jim Caliendo,president and CEO of PWCampbell, a company that designs and builds branches.
Caliendo, a former banker, was among several to weigh in onthe topic this week during the 5th Annual SNL Financial Community Bankers Conferencein Dallas.
He said the branches that banks keep are often gettingremodeled or downsized to operate more efficiently. They are designed toaccommodate fewer staffers, with levels aligned to customer traffic, and to capitalizeon technology such as interactive teller machines that connect customers, viavideo, to a banker at a main location. These smaller branches may not have anytellers. Instead, they are increasingly staffed with one or two universalbankers, who handle both teller and routine banker duties. They often earn morethan tellers but handle a broader range of responsibilities and, as such, allowbanks to downsize headcounts and ultimately save money.
Caliendo said banks must evaluate each branch as a uniqueoperation, determine its potential and the needs of the customers it exists toserve. If it is in a relatively poor location and simply cannot proveprofitable regardless of potential changes, he said, it probably will getclosed. But others that can turn profits and be of use to customers if they areredesigned to be more efficient and more tech-centric are strong candidates tokeep in place, he said.
In addition to downsizing, Caliendo said changes such asinstalling modern, less expensive lighting can help bring down costs and shouldbe considered. But more notable, he said, is to design buildings so they focuson the latest technology that customers more and more are using and that boostbanks' efficiency. And, banks should design branches to maximize marketing.They should creatively and colorfully attract customers' attention withadvertising and promotions inside and out of the building to make the most ofthe space, he said.
James Geeslin, chief consumer banking officer at , agreed and he,too, emphasized that every location should be evaluated for its own merits."What's happening in one branch may not be happening in another," hesaid, noting that the needs of one community may prove much different thananother's, and therefore branch decisions should be locally tailored."You've got a lot of variables to look at."
Banks, he said, will inevitably close more branches. In somecases, a given location will no longer be used for banking services. But inother cases, banks may replace a branch with "smart" ATMs, whichprovide customers live connections to offsite bankers. Extraco Banks has donethis with success, he said, getting savings from closing a branch but holdingonto the vast majority of deposits and customers at a given location bycontinuing to maintain a presence via the special ATMs.
President and CEO Jill Castilla has in recent yearsclosed four branches and consolidated its physical presence into one mainoffice. She said the savings to be had by downsizing the physical networksimply outweighed the positives of keeping them. And what it saved has helpedthe bank invest in online offerings for customers.
But Castilla said her bank put a great deal of effort, andcontinues to do so, into marketing itself to and connecting with customers tomake up for what it relinquished with the closed branches.
It is among the country's most active banks on social mediasuch as Twitter and Facebook. It started a street festival in downtown Edmond,Okla., where it is based, attracting thousands of people who now associate thefun event with the bank, creating immeasurable goodwill.
The bank also invests in what it calls "cash mobs,"a process in which it gives staffers a few dollars to spend at localbusinesses. They tend to spend more than the bank gives them, and as they dothis, they are asked to share their experiences on social media. This providesstaffers with a perk and local business with positive exposure and, in turn,inexpensively connects the bank with more potential commercial customers,Castilla said.
"It's been this great builder of our culture," shesaid, adding that it is a culture no longer built around branches but insteadon capitalizing on technology and innovative marketing to meet customers wherethey want to meet.