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Like the Postal Service, small banks must radically change their business model, expect more consolidations and mergers, focus on critical services and avoid relying on the U.S. government for help it could make things worse.
March 18 -
Big banks have discovered that mobile banking is their best bet for combating deep consumer distrust and rampant turnover. Small banks can overcome their lock on mobile by playing up the strengths of their existing business model.
January 30 -
A positive spin around branches will proliferate, as will talk about wearable tech. Oh, and expect tons of M&A -- between banks and nonbanks.
March 17 -
Mobile apps and the ATM are rapidly becoming alternative touch points for many customers. But does that mean that bank branches are dinosaurs? The answer is definitely no.
March 11
A steady decline in branch traffic is more ominous than simply a customer's preference for online banking. For smaller banks, the decline is the first domino to fall in a sequence that strikes at the heart of community banking.
There is an antidote to decreasing lobby traffic, but putting all your chips on a mobile banking program only compounds the problem.
Over the past few decades, we've pushed customers out of the lobby knowing electronic transactions are more convenient for customers and cost-efficient for banks. ATMs, ACH, telephone banking, online and mobile banking, bill payment and now remote deposit capture have triggered significant declines in branch transactions.
We've done such a good job that the average number of transactions per branch fell 45% since 1992 according to
Despite declining transactions, the number of U.S. branches
The conventional response is to close branches and cut the hemorrhaging. But that solution triggers a cascading set of concerns.
Customers choose banks in large measure by their proximity to work or home, and by the size of the bank's branch network. Closed branches inconvenience customers, shrink the network and make the institution less appealing.
Customers rely on branch offices for opening accounts, answering questions and resolving issues. Each newly closed office reduces the opportunity to help.
Perhaps even more alarming is a bank's inability to cross-market products. Each lobby customer lost is another person who can't be welcomed to the bank, sold a product or extended personal service. And, online marketing can't match the persuasiveness or the intimacy of a staff interaction.
Perhaps the most ominous consequence of a decline in lobby traffic concerns branding. Ask a smaller bank what differentiates them from larger institutions and you'll invariably hear "our people." If, indeed, staff members are the biggest brand differentiator, the decline in traffic and the closing of branches exacerbates the problem. Declining traffic means community banks are increasingly unable to put their best foot forward. They cannot unleash their strongest weapon because fewer and fewer people are unable to experience the level of service and the personal attention available at community banks.
So what's the real solution? Boost lobby traffic.
Community banks need a steady flow of prospects and the best response may be to partner with a local retailer. Position the retailer or franchise owner inside your lobby and market to their customers. You'll need to consider several factors when selecting a partner: demographics and frequency of customer visits, product compatibility, credibility and reputation.
Bank staff could manage the facility or simply collect rent. Chances are the bank's prominence, reputation and parking accommodations would make it an attractive partner or landlord.
Consider local businesses, Federal Express or UPS facilities, insurance or tax preparation services, coffee franchises, realtor office or even a U.S. Postal Service sub-station. A partnership with a successful retail concept virtually guarantees constant customer traffic.
Last year, U.S. branch closures
One option is to eliminate branches, push mobile services and promote virtual bankers, but to follow that path takes the community out of community banking.
Kevin Tynan is senior vice president of marketing at Liberty Bank for Savings in Chicago.