5 Big Bank Executives on the Future of Branch Banking


Digital rendering of a "micro branch" by Fifth Third Bancorp.

One of the hottest debates among bankers today involves the future of bank branches. Will they become irrelevant in years to come, replaced by online and mobile platforms? Will there always be a need for a physical presence irrespective of technological progress? Or, more likely, will the future call for a carefully crafted combination of the two?

At this year's Barclays Global Financial Services Conference in New York, virtually every bank executive that presented touched on the topic. The tenor of the presentations ranged from quasi-dismissal of the issue to full-fledged embrace of the ongoing transition in the industry. What follows, in turn, are a handful of the more poignant comments touching on the future of bank branches.

Kelly King, CEO of BB&T (NYSE: BBT  )

I know there's a lot of conversation going on these days about the future of retail banking and how fast people will close branches and all that. I personally think all of that is a bit overblown, but we did just close about 3%, a little less than 3% of our branches, just as kind of a natural pruning process.

Timothy Sloan, CFO of Wells Fargo (NYSE: WFC  )

With over 9,000 stores and offices in all 50 states and over 12,000 ATMs, we have more stores and serve more communities than any other U.S. bank. Over 22 million customers actively bank with us online, and over 10 million customers actively bank with us via mobile, which is our fastest growing channel.

While over 80% of our deposit customer interactions are self-service, most customers open their first account and establish their banking relationship with us in a store. That's why we've invested in our store network that provides a Wells Fargo retail store or an ATM within two miles for nearly half the population of the United States, including small businesses. That's a very powerful advantage for Wells Fargo, and it's also a very powerful advantage for the communities that we do business in.

Richard Fairbank, CEO of Capital One (NYSE: COF  )

From the founding days of Capital One many years ago, we set out to build a direct company. We believed direct was a macro trend. We, in fact, were going to build an entirely direct company, and we picked businesses that most lent themselves to direct and were also more going national in things like credit cards. And we went into auto and other things.

I've gotten a real appreciation over the years of the power of local distribution, face-to-face distribution in some of these things, and so I don't think the answer to the case in retail banking is the all direct solution because I think that so many people are -- like my oldest son, who I say, "Do you go visit a branch?" And he goes, "No." I'd say, "So why don't you sign up for the Capital One 360. It's an entirely direct thing." And he goes, "Because I don't know when I'm next going to need a branch." So there's an optionality that branches provide and a benefit that I have a real appreciation for.

But it's very obvious the direction that banking is going. It is going, at ferocious speed, more digital and more direct. But I think our answer will be a blend of some physical distribution and have the emphasis on digital banking.

William Demchak, CEO of PNC Financial (NYSE: PNC  )

New innovation also means a complete rethinking of our branch network. And our expansion into the Southeast offers a lot of opportunity to experiment in order to figure out what works best for our customers.

Now, the markets we've entered in the Southeast, and we get criticized for this, we will never have the physical presence that we traditionally had in the Northeast -- the Midwest markets. But we don't actually think that that would fit the banking model of the future. And it doesn't mean that we're not going to occasionally open new branches. We will do so when we think branches remain important and we will do so where it's strategically important to do that.

But the branches of the future may not function the same as the branches of the past. In the traditional branches we do operate, we'll be complemented by what we refer to as a digital financial network, featuring a hub-and-spoke model of all-purpose universal branches, supported by sales-focused, cashless branches and fully functioning ATMs, all of which complement our mobile online platforms to enable our customers to bank when, where and how they want.

Kevin Kabat, CEO of Fifth Third Bancorp (NASDAQ: FITB  )

[T]he landscape of the consumer business is changing, but we continue to drive solid results. ... We continue to see an evolution in terms of our delivery and increasing consumer's desires to interact with us through multiple channels.

Those developments present us with opportunities to look at our branch network in a different way. Our banking centers are the most visible brand identifier in the community and they remain a key source of deposit and cross-selling. We're going to be thoughtful about optimizing our branches because a closed branch can't possibly make money, much less be profitable. We know that in branches where we deploy image-enabled ATMs and programs to encourage their use, it's having an impact on the volume of transactions at the teller window.

With this behavior in mind, we developed our micro branch format. The micro branch ... is a smaller, more cost-effective solution, with two to three personal bankers in a fully automated, self-service, no-cash handling branch. We'll begin piloting this in best fit branches in the next several months. We think, over time, about 1/3 of our current branches may fit the profile for either significant self-service capabilities or, potentially, micro branch replacement. It's a work in progress and we'll be measured in our approach in order to maximize or optimize our service delivery and our loan and deposit-taking capabilities.

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  • Report this Comment On September 18, 2013, at 11:11 PM, enginear wrote:

    Interesting.

    I moved to Hong Kong, which is much (!) more pedestrian oriented, and the banks are quite different.

    Yesterday I went past a bank of 5 or 6 ATMs on the ground floor, up a set of stairs where their 'Premier' services (for large account holders, and 'counter services' exist. Three tellers were working counters, and more were in the Premier area where coffee is served while they take care of you.

    Of course they also sell insurance and do brokerage business... like I say, its different.

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