As banks and credit unions experiment with new branch office formats, Fifth Third opened in April its first “microbranch,” a bank branch about half the size of its traditional brick-and-mortar office that does away with teller lines and cash drawers.
The first microbranch opened in downtown Cincinnati with plans for more to follow in Detroit and Chicago. About 20 of the test branch formats should open by the end of 2014, said Kevin Sullivan, managing director of distribution strategy for Cincinnati-based Fifth Third Bancorp.
Microbranches range from 1,500 to 2,500 square feet in size, compared to a traditional branch office that is closer to 4,500 square feet, Sullivan said.
The smaller branches are being placed in locations near full-service “hub” offices where mortgage loan officers, investment executives and other specialists work.
The branch that opened earlier this year in Cincinnati’s Carew Tower features an online banking station, a touchscreen kiosk used by customers to learn about mobile banking, online bill payment and Internet banking. Customers can use the station to access their account online. The kiosk also has information on products and services, and electronic tools such as financial calculators for estimating loan payments, for example.
Another microbranch feature is an ATM placed in the entrance that’s accessible 24 hours, seven days a week.
“The way that customers want to interact with banks is changing, much in the same way customers have become very comfortable with assisted self-service at the grocery store or when you check in at the airlines,” Sullivan said.
“There’s really much of a larger play for us here to redirect our investment away from the bricks-and-mortar to more of the digital channels,” Sullivan said.
Fifth Third, the region’s largest bank, and its competitors are responding to changing customer habits and cost pressures. Customers do more of their routine banking online or by mobile means. And digital transactions are less costly than in-person transactions.
As Chase, Fifth Third, PNC, U.S. Bank and local credit unions MidUSA and Wright-Patt experiment with the “branch of the future,” the common theme is that new branch offices won’t bear a resemblance to many of today’s traditional branches. Instead, technology will replace teller functions to cash checks and deposit and withdraw money. The people working at a branch will be customer service representatives and financial advisers who will walk the floor and help people with bigger transactions such as loans.
“It sort of doubles down on the importance of having the right kinds of people there who can have these more in-depth conversations,” Sullivan said. “As we went through developing this strategy, it really puts a premium on the recruiting and training associated with employees.”
The biggest challenge for banks in making these changes is getting customers to imagine the future the way banks see it, said Rob Evans, director of product marketing for Nautilus Hyosung America Inc., a South Korean company that makes merchant-owned ATMs and other hardware and software technologies for the financial industry. Nautilus Hyosung has offices in Miami Twp.
The future branch concepts are leading to better data at the end of the transaction, less waiting and more meaningful communications, Evans said.
But customers for the last 150 years have been used to lining up in the bank to wait for the next available teller.
“It’s going to be critically important in the interim to have clean lines of sight to warm body humans who are there to ease … the transition,” Evans said.
“At the end of the day, the notion is I don’t want my customers standing in line,” he said. “This is better than it used to be and in the midst of all that, the other hard fact of life for financial institutions is they have to deliver services more cost-efficiently,” he said.
Along with introducing microbranches, Fifth Third is developing a new, high-tech ATM the bank calls a “self-service customer service representative.” The machine doesn’t look like a traditional ATM because it has a large touchscreen.
Sullivan said the ATM Fifth Third is testing in the company’s labs has video capabilities. It even might dispense coins.
“What remains to be seen I think is what this means for sort of the long term future for the branch itself. What I would anticipate is we will continue to add branches, particularly in our growth markets, but they won’t (all) look like our traditional branches,” Sullivan said. “There probably will be some very modest reduction in branches, particularly in our legacy markets.”
“One element of our strategy and probably more so than our peers, particularly in our growth markets like the Southeast, is to increase our ATM count, particularly our off-site ATM count,” Sullivan said.
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Read these past stories online about bank branch trends:
March 2013: Banks plan more branch closings
May 2013: Credit union unveils new video tellers
Aug. 2013: PNC talks future of bank branches