Myriad factors go into a bank’s decisions about where to sprinkle new branches or when to close low performers. But in the early days of the pandemic in March, one reason to abruptly close branch lobbies stood above the rest: public safety.
“We started with a wave where nearly every financial institution either closed their lobbies entirely or converted the lobbies to appointment only,” said Steven Reider, president of the consulting firm Bancography.
As cities and states struggle with various phases of reopening, the vast majority of banks in the U.S. are serving customers in person in some capacity, even if the hours are shorter, the drive-through lines are longer or visitors must speak to their banker through a protective screen at an appointed time. It also means branch-analytics teams need to incorporate a new set of data points when deciding which branches should fully open and which should permanently close.
Here is a look at how two banks are navigating near-term decisions to reopen — Birmingham, Ala.-based BBVA USA, which has 637 branches spread across the South and West, and Rockland Trust, with 96 branches in the greater Boston area — as well as advice from experts on why and how branch models should be adjusted.
A 'ready to open' score
Adrian Serna, the physical channels strategy manager for branches and ATMs at BBVA USA, has been hashing out a plan for the $93 billion-asset bank's
The proprietary score is based on a combination of external and internal factors. On the external side, the team considered the number of COVID-19 cases per 100,000 people within a county, the cases per square mile and the new cases forecast. They used 15-day moving averages to account for the fluctuations in volume of cases.
The score also considers the number of branch employees who are available to work, the ability to socially distance within the lobby and the risk level of interactions. Before opening, branches are also armed with Plexiglas barriers, signage about social distancing, disposable pens and more.
The vast majority of BBVA’s U.S. branch lobbies were closed in mid-March, with most services shifted to the drive-through. Since June 22, 100 branches have opened their lobbies again without restricted hours or appointments, including all of the locations in Colorado and New Mexico and a handful in Alabama.
The model can slot branches into three categories: ready to open, standby (growth rate of virus cases is flat, and the branch is almost ready) or not ready. But the final decision lies with the people on the ground. If a branch manager or district manager says no, that trumps an encouraging score.
“We didn’t want to say, 'I have a feeling' " that a branch is ready to open, Serna said. “It’s a better message to our customers and our employees that this is not a feeling-based decision, it’s a data-based decision. And it’s not final — if a branch can’t open because of a specific situation, we’re not opening.”
Branch activity and geography
When Rockland Trust in Rockland, Mass., closed its branches on March 18, customers could only bank in person by appointment or in a drive-through, depending on the location.
In early June the $12 billion-asset bank started reopening branches for appointments only, then reopened 10 branch lobbies in the middle of June as a test to ensure proper safety and social distancing measures were in place. One week later, it reopened all branch lobbies.
Like BBVA, the bank erected Plexiglas barriers and posted signage promoting safety precautions.
The team making these decisions at Rockland, which numbers 25 to 30 people, has been meeting three days a week since early March to strategize closings, staffing hours and openings. The team members considered factors such as branch activity, which includes the number of transactions in the drive-through, the number of appointments and the reasons for appointments. Locations with heavy transactions were candidates to open earlier.
“Geography was key,” said Patrick Myron, senior vice president of retail network strategy and sales analytics at Rockland. “We wanted to make sure that as we reopened, our branches were spread out enough so all our customers could get to a branch without having to go completely out of their way.”
They also solicited employee feedback to make sure everyone was comfortable moving forward.
His team tracks branch statistics in a dashboard. Staffing decisions are informed by the model the bank developed with Kiran Analytics, a Verint company, two years ago, which drills down into geography as well as activities as granular as the number of minutes and seconds it takes to deposit a check.
“The question everybody has is, what will happen now?” Myron said. “Now that we’ve reopened, will everyone storm into the lobbies and stand in teller lines, or will a percentage of people decide they will use mobile and never come into a branch again?”
Myron suspects people will return to branches, but perhaps not for all of the same reasons as they did before. But he says he feels Rockland is well prepared for a transition.
“Transactions are slowly leaving branches anyway, which is why our newer branches are more focused on customer conversations and sitting down one on one,” he said.
What experts say
The pandemic has brought new thinking to the analytic models used by banks across the board in their decisions about branches.
“In the early stages of the pandemic, it was easier to understand the impact that COVID-19 had on a bank’s operations, because entire states or counties shut down," said Alexander Martonik, industry specialist for financial services at Esri, a maker of mapping and analytics tools for Fortune 500 companies, including financial services firms. “But now we’re seeing this middle ground of periodic disruptions occurring at the community level, and banks need to monitor emerging hot spots on a hyperlocal scale.”
Esri’s software helps banks consider such indicators as rising case numbers, growing transmission rates and variables that may explain these changes, such as population density. Martonik said banks draw their data from a variety of sources, including local, state and federal health officials and private organizations such as the COVID-19 dashboard maintained by Johns Hopkins University.
Short-term decisions about when and how to open will often be tied to the ebbs and flows of the virus.
Reider of Bancography predicts that many banks will use geographic information system (GIS) tools that display and analyze data spatially. They can be used to figure out how to open branches that accommodate a wide swath of their customers within reasonable distances, while keeping some branches in reserve in case of an outbreak at an open one. For example, a bank could use these tools to map out its ideal scenario, such as having branches within a certain number of miles of a certain percentage of its customer base, then use that data to decide which branches to open that meet those needs.
He also said banks will recalibrate their incentive systems by revising sales goals and finding a compromise between fairness to employees who couldn’t reach their goals amid lockdowns and not overpaying for production that didn’t occur.
Other changes may be more permanent.
“Banks are looking at which emergency response decisions can be reversed and which are long-term decisions,” said Jim DeLapa, general manager of Kiran Analytics.
The most common thing he has heard from banks is that their overall strategies haven’t changed, but they will accelerate longer-term plans to enter or withdraw from an area.
Other concerns may materialize down the line and prompt changes. For example, Reider predicted that some banks will try to cut expenses by closing branches in the expectation of, or in response to, loan losses.
Another question mark is changing customer behaviors. Digital adoption is increasing. And banks that were slow to close their drive-through windows, which pre-pandemic were on the decline, “are thanking their lucky stars,” DeLapa said.
Overall, the decision to close a branch permanently is always more complicated than it appears — and overlooking customer tendencies may result in a damaged reputation and a wave of defections to rivals.
“If you close the wrong branches and don’t have enough capacity in other branches, customers will have to wait longer, satisfaction scores will decrease, sales opportunities will be lost and customer attrition will follow,” said DeLapa, whose company uses gravity modeling, which recognizes that every branch is influenced by the distance and volume of other service points, to analyze how customers migrate between branches. The opening hours of nearby branches and the proximity and presence of the competition are also important.
“Getting this wrong is costly and irreversible,” DeLapa said.
