Net Net: Promoting innovation and managing change
Net Net: Promoting innovation and managing change

Bank branches are evolving...and shrinking

What is fintech really about?

As spring sets in, most branches are expanding as new life buds. Everywhere but Wall Street, at least.

The industry is undergoing its most dramatic shift in how services are provided to the everyday client since the pneumatic tube was stripped from suburban drive-through locations and replaced with the automated teller. Branches are shrinking in size and technological features at brick-and-mortar locations are being beefed up to reduce reliance on service staff as banks aim to push more customers onto digital products.

"One way we are promoting adoption is by deploying digital ambassadors in our financial centers," Bank of America Chief Financial Officer Paul Donofrio said on its first quarter earnings call. "Digital ambassadors engage with customers who come to our branches to transact. They educate these customers on alternatives to branch banking which are not only more convenient for them but also less expensive for us."

Bank of America is rolling out a "digital bar" — think Apple's Genius Bar, but for bank customers — at more than 1,000 branches over the next few years, and at locations that will soon include New York.

Bank of America, digital bar
Source: Bank of America

The digital interface is key in helping banks provide services quicker, while freeing up staff to provide more complex offerings. It also helps them eliminate unnecessary staff as tech automates away certain roles. At Bank of America, the number of "sales specialists" is up 13 percent year-over-year, while full-time employees (which includes tellers) is down 1 percent year-over-year to start 2016.

JPMorgan Chase reduced its number of branches by more than three percent year-over-year in 2015, and trimmed even more to start 2016. Over the last three years, a representative for the bank said JPMorgan Chase teller transactions fell by more than 100 million as consumers have increasingly adapted to digital payment options. Now, JPMorgan is also making shifts in new branches, including through new ATMs that can conduct card-less transaction via smartphone PIN codes and teller machines that can deliver $48 in exact change.

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A representative for JPMorgan said that it, like Bank of America, aims to provide more self-service offerings to free up specialists. The bank's traditional ratio of 60 percent transactional staff and 40 percent advice staff at legacy locations is flip-flopped at new, smaller centers, where 60 percent of the staff provides financial advice.

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Big banks are still shuttering locations — in its first quarter earnings report, Bank of America reduced its "financial centers" by 3 percent and Citigroup pruned 4 percent of global locations, and 7 percent of North American branches year-over-year. They're also looking to take up less space, where branches are left open. Big banks are under margin pressure from plenty of factors, between regulators clamping down on lending, the Federal Reserve disappointing on expected interest rate increases and a very disappointing start to the year on trading desks.

"Branches remain a critical part of how we serve clients," said Will Howle, president of Citigroup's U.S. retail banking division. "But how clients use them is changing."

Citigroup is using "smart bankers" at its compact branches, which include between three and four staffers contained in as little as 600 to 1,200 square feet to provide service and sales roles to customers, according to a company representative.

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That's a fraction of the space a bank branch typically occupied, even just a few years ago. Most banks are aiming to cut down on the amount of square footage used at retail locations.

Citigroup is not alone in its aim to do the same amount of business with fewer tellers and less space. When Wells Fargo customers are at an ATM and have a question, service professionals are alerted via wireless tablet that in-person assistance is needed. Like Citigroup outlets, a smaller Wells Fargo branch can employ as few as three people, a company representative said. Gone are the days of cavernous bank branches with marble floors and 30-foot-high ceilings.

"This initiative allows us to bring Wells Fargo stores to more places where our customers live, work and shop," said Jonathan Velline, head of the bank's ATM and store strategy. "While it is a less expensive format, its greatest advantage is that it allows us to put stores into spaces that would be too small to accommodate our traditional store designs."

Correction: JPMorgan Chase teller transactions have fallen by 100 million over a three-year period.