Thrusting a Sword Into the Heart of the Bank Branch (Sort of)

Bank of America Corp. apparently hates the bank branch -- again. The question is, should it?

Last week's announcement that Bank of America was shuttering 10% or so of its 6,100 branches just screamed, "Here we go again!" We're back to the same old debate about whether branch banking has a future. It wasn't too long ago that branches were viewed as passe. That was before the branch boom in the early 2000s spearheaded by Washington Mutual. So many bank branches sprang up that there were municipalities that sought to limit their zoning, arguing that bank branches dampened small-town foot traffic and commerce.

The debate is obviously different now. Bank of America is not of that view that branches are bad, but that the customer is going elsewhere.

From the WSJ on July 28:

A seven-month review by Bank of America Corp. of customer usage patterns shows less and less dependence on traditional outlets, the bank's head of consumer and small-business banking said Tuesday.

The ongoing strategic review, which began in January, showed that nearly 50% of all deposits to the bank are made at an automated-teller machine, up from 33% just six months ago. In the last 18 months, about 2.8 million Bank of America customers have started banking by cell phone, he added, and Bank of America has a 60% market share of bills paid online.

But as one commentator on the story explained it, the change in customer preferences is not without prodding from Bank of America:

From 33% to 50% in 6 months - Have you been to a BOA recently, now, BOA employs people outside of the door and they encourage you to go to the ATM. I have been harassed and discouraged to go to the teller. I deposit significant amounts to the bank for an organization and feel more comfortable depositing the check at the teller. But nowdays whenever I go the managers or the people at the door ask many questions and encourage going to the ATMs.

To me, the debate over branches is moot. What is more interesting about these developments from BofA is their implications on marketing. Banking is now 10 years into a shift in marketing toward a branch-driven model, whereby the branch acts not just as a centrifuge of services, but a 3D, 24/7 marketing vehicle.

But recessions do funny things. Recessions can diametrically change consumer behavior, and when consumer behavior changes, banks are willing to change as well. This shift away from branches offers the opportunity for banks to invent a new marketing model, a virtual one, that generates equal demand and brand awareness, without the real estate costs. The central challenge will be creating a brand that "feels" as solid as a branch-banking network without using branches to do so. Can it be done? Can a marketing program that is heavily leaning on virtual channels create similar results? I think so. As time goes on, virtual presence will not be feel as "virtual," but will be considered more solid. After all, eyeballs are eyeballs and they translate into brand awareness online as they do offline. Exciting times, for sure.

Tags: bank-of-america, branch-banking, branding, marketing, retail

Comment by William Dunkelberg on July 30, 2009 at 5:53pm: They are closing their second branch in our area and our bank (Liberty Bell) appreciates the fallout. Ditto for the TD takeover of Commerce.

Comment by Jeffry Pilcher on July 30, 2009 at 6:58pm: Nice article JJ. Thanks.

Comment by Andres Fuentes-Torres on July 30, 2009 at 8:10pm: Excelent article JJ...the long-term tendency, in my opinion, is less branch and more virtual operations.

Comment by shelly schwieso on July 31, 2009 at 5:27am: we both got on this band wagon i see

Comment by Lothar Fritsch on July 31, 2009 at 9:57am: nice article! yes, there is another shift away from branches - its is the pendulum swinging back helped by the recession and adoption of self-serve... but as advisory services become more and more acutely needed by increasing numbers of older consumers, the role of the branch will be enhanced again and again.

Comment by JJ Hornblass on August 2, 2009 at 7:52am: One additional point I wanted to make and thought of this weekend. I'm in London this weekend, where mobile services are far more prevelant than in the US. This shift to the mobile banking model opens banks to a new risk factor, and that is an increased susceptibility to customer defections. Just as the rash of online personal finance sites are slowly chipping away at the sticky factor of customers that traditional prevents customer defections, a branchless retail strategy additional converts banking customers into data points from relationship-driven banking consumers. The more "electrified" are consumers, the easier it will be for applications to be built that can more easily transfer a customer account to a new banking institution. You trade stickiness of consumers for easier transferability of consumer data. It's another poison to consider.