Tech-Savvy Bankers Make the Case for Branches

ORLANDO — Bank branches may be falling out of favor, but even the most tech-savvy bankers aren't prepared to renounce them entirely.

Take Manolo Sanchez, the chief executive of BBVA Compass, whose bank is spending $117 million to buy the branch-less online startup Simple. You might expect him to declare brick-and-mortar bank locations passé — and yet his company just opened two new branches last week.

That's because customers still want to see branches — even if they don't go in, and even if they do most of their banking on the computer, the tablet or the mobile phone. Just seeing a physical bank location actually increases a person's interest in doing business with BBVA Compass online, he says.

"We have not been able to decouple that in the mind of the consumer. … We tend to see more correlation than we would expect between physical presence and online sales," Sanchez said in an interview Wednesday.

The traditional bank branch is "still very relevant from a brand-awareness perspective," he adds.

His comments were echoed by several other senior executives speaking here at Retail Banking 2014, an American Banker conference.

"Do branches stay in the picture? Yes they do. There's a demographic that still wants to come into the branches," Catherine Bessant, the global technology and operations executive at Bank of America (BAC), said during a presentation Thursday.

RBS Citizens Financial Group CEO Bruce Van Saun, who in January agreed to sell some of his bank's branches to U.S. Bancorp (USB), says that divestiture was a special case. Citizens, which is planning to unwind itself from parent Royal Bank of Scotland through a series of public offerings, is largely concentrated in the Northeast, and made the decision to retrench from its relatively far-flung Chicago holdings.

"The branch is still important," though "the size and shape and purpose of the branch will continue to evolve," Van Saun said in an interview Thursday.

But those endorsements of the bank branch — from the country's second-largest bank, which prides itself on doing business with half of American households, and from a regional bank focusing on separating itself from its troubled, foreign parent company — are relatively expected.

More surprising is the ongoing commitment to branches from BBVA Compass. The U.S. unit of Spain's Banco Bilbao Vizcaya Argentaria has aggressively pursued in-house development of better technology even before the deal to buy Simple.

Sanchez, who skipped a tie for his speech to a hotel ballroom full of bankers on Wednesday, often looks and sounds more like a Silicon Valley startup founder than a staid, pinstriped Wall Street type. But even though Simple will bring BBVA Compass a group of customers that are perfectly happy doing their banking online rather than in person, Sanchez gives some practical reasons for maintaining his bank's 685 physical locations.

Most of all, he says, it's crucial for marketing. BBVA Compass, based in Birmingham, Ala., has roughly half of its branches in the ultra-competitive Texas market, where spending money on physical locations makes almost as much sense as investing in online startups. (That spending on real-world real estate goes beyond just branches; Sanchez says that BBVA Compass is looking for more investments like its sponsorship of the stadium for Houston's Major League Soccer team. Putting its name on that stadium "tripled our brand awareness," he says.)

Maintaining branches in some form also makes sense for BBVA Compass's efforts to sell some financial products, even as it experiments with the size and shape of those locations, Sanchez says.

"What we need is for the branch to be different," with fewer tellers, smaller footprints - and sometimes even couches instead of rigid desk chairs. "We're experimenting with furniture a lot," he says.

Ultimately, "I'm not sure about the branches," and what their ultimate shape will be, Sanchez says. But whatever that is, "the bankers will be there."