Inthe 1960s, domestic automakers had a set of firmly held beliefs and assumptionsabout their business including that the U.S. car market was isolated from therest of the world and that fuel would remain cheap and abundant. "Well asthe industry learned the hard way, those beliefs and assumptions becameinvalid," said David Mooney, president and CEO of Chicago-based .
Mooney,speaking during American Banker's RetailBanking Conference last week in Las Vegas,
Alliant,which is the eighth-largest credit union by assets in the U.S., has just 12branches spread around the country
Butnot everyone at the conference was of the belief that branches serve littlepurpose in today's environment. Jim Caliendo, president and CEO of PWCampbell,pointed out that Apple is building physical stores all over the world."And who knows more about technology than they do," he said.
ButCaliendo said financial institutions must do away with outdated branch featuressuch as teller lines and instead work to make customers feel welcome from themoment they enter the branch. A well-designed branch gives banks and creditunions the ability to tell customers what they do and how they can help.
KateDame, vice president of branch administration for Lowell, Mass.-basedJeanne D'Arc Credit Union
Bank branches are not like bookstores where productselection is simple, Deen said. "We're not like books. It's easy to choosea book online. So there's still a place for branches certainly," she added.
Nevertheless, branch networks are shrinking, and Deen said alot of that is due to a right-sizing that is going on across the industry. Shenoted that in 1970 there were more than 9,000 people per every branch in theU.S., but by 2008 that number had shrunk to just above 3,600 per branch."It got a little crazy with all the branching," she said.
Caliendo of PWCampbell, which designs and builds branches,said other retailerssuch as gas stations and supermarkets have conditioned today's consumers to domore self-service in the facilities, but bank branches in many instances stilldo not have those capabilities. He said today's branches need tofeature much more technology and in most cases should be able to fit in 1,600square feet.
But Mooney of Alliant said branch transformation is not the answer because the revenueand expense problem associated with those buildings is structural. He comparedit to the case of Blockbuster Video, which tried to save itself by offering newproducts. "The problem was that Blockbuster still had an outmoded revenuemodel, so it didn't matter that they made some tweaks. It wasn't nearly enough.And what does that sound like?"
Mooneypointed out that the typical bank branch opens fewer than two new accounts perday. "No retailer could stay in business with that kind ofproduction," he said.
Theindustry is seeing a decline in total branches, which Mooney said is muchneeded after the previous buildup. But it's still not enough, as a typicalfinancial institution has about 60% of its expenses tied up in the branchesthrough real estate, personnel and systems costs.
Mooneyremarked that outdated thinking continues to pervade the industry as somecredit unions seem intent on finding ways to justify their branch count."Are we protecting something that shouldn't be protected?" he said.