Closing many branches, but keeping most customers

Over the past two years, OceanFirst Financial in Toms River, N.J., has closed 33 branches — or 36%. Yet it says it managed to retain 94% of its customers in all of the axed locations.

Christopher Maher, the $7.5 billion-asset company's chairman and CEO, chalks the retention up to a decision to survey customers about their digital experiences and preferences, and then channel those findings into a mandatory seven-week employee training program. Workers were trained how to teach customers to use OceanFirst's website and mobile app to do many of the things they once did at their branches.

“You shed virtually 100% of the cost associated with those branches, but keep, in some cases, 95% of customers," Maher said. "Think about the economics of that. That’s an incredibly powerful advantage.”

A key lesson learned from the shift, Maher said: “If you engage your customers in mobile, your satisfaction scores go through the roof and your retention levels at the bank wind up being very high.”

OceanFirst’s training program is part of of a broader trend. More banks are equipping frontline staff with the detailed knowledge necessary to properly promote digital services.

Stephen Greer, a senior analyst at Celent, pointed to a program from Barclays called the Digital Eagles.

These particular employees are “passionate about empowering our colleagues, customers and local communities to be more confident with technology and to move forward in the digital world,” according to the Barclays’ website.

Greer also referenced BofA’s marketing efforts around mobile banking, which OceanFirst studied. “Barclays and Bank of America have generally led the pack as far as mobile adoption is concerned, and they have fairly strong active user rates,” he said.

Among community and regional banks, Greer cited Umpqua Holdings' recent efforts to build what it calls the “human-digital” banking experience. The Portland, Ore., company in 2017 embarked on a strategy to use technology to personalize banking.

“It seems to me like this is a bigger trend where you're seeing institutions, with their branch personnel, try to empower them to do more and fulfill more needs,” Greer said.

If OceanFirst “is going to be focused more on mobile for the time being and training them to be able to speak to digital banking more formally, in the future you can imagine where they would empower that staff to do more advisory functions for more critical banking needs,” Greer added.

This kind of approach could be especially critical for regional banks, said Lane Martin, a partner in the U.S. digital practice with the consultancy group Capco. “We come across this quite a bit with respect to digital modernization, particularly with our regional clients that are trying not to lose the essence of who they are with respect to servicing their customers with a human-centric approach,” he said.

“There’s a community-first element to this where we see proactively there’s a handoff between the physical and virtual channels,” Martin added.

OceanFirst has been an active acquirer in recent years, buying five banks since mid-2015. Its recent acquisitions were Sun Bancorp in Mount Laurel, N.J., and Capital Bancorp of New Jersey in Vineland, which added a total of 34 branches and $1 billion in assets. Some of the branch cutbacks were related to overlap with Sun. OceanFirst could close another seven branches this year, according to its latest quarterly earnings release.

OceanFirst has used the cost savings from branch closures to invest in digital programs such as a state-of-the-art digital call center and the certified digital banking program. But OceanFirst first had to convince its own employees of its capabilities.

Maher said before the training program was implemented, less than half of OceanFirst employees personally used the bank’s digital products. Employee feedback to the training program itself was mixed, he said.

“We had a very strong segment of employees who were excited about the opportunity to learn about these things,” Maher said. “I would classify them as digital natives. And then we had a segment of employees that wanted nothing to do with it and didn’t feel like it was their job or responsible to do the training.”

To address this split in attitudes, OceanFirst initially trained those employees who were enthusiastic about digital banking.

“After we got through them, we went to everyone else and said, ‘This is simply a requirement of being at OceanFirst,’ ” Maher said. “ ’We want you to be here, and we’ll spend the time and energy to train you, but it will not be acceptable for you to continue at the bank without gaining these skills.’ ”

To sweeten the pie, OceanFirst offers employees bonuses to create more digital interactions with customers. Maher said the company established benchmarks for driving digital behavior based on the initial customer survey it did three years ago.

As a result, OceanFirst has seen increases in mobile and online banking activity, specifically with mobile deposits and digital bill pay, according to a recent investor presentation. And as of December, all OceanFirst branch staffers had completed the training.

Maher said the training itself covered every facet of the bank’s digital capabilities, including biometric identification, personal finance management, online account opening and video banking.

The training also educated employees about third-party apps such as PayPal, Venmo and Zelle. OceanFirst currently uses Popmoney for person-to-person payments.

“They’re not our products, but if a customer calls and says they’re having a problem with something like Venmo, we need to make sure our customer service is equipped to address the most common problems with those apps,” Maher said.

OceanFirst’s decision to be well versed in third-party apps goes back to its belief that customer retention brings sizable rewards, Maher said.

“The goal is retaining customers, and the retention of customers has a dramatic impact on profitability,” he said. “If you have a checking account customer and keep them an average of seven years, you’ve almost doubled the profitability of that customer. The priority is that we want to keep these customers, and when they call us with any problem related to those other products, there’s a certain level of care they can expect from us.”