Finding Face-to-Face

Technology has revolutionized customers' need for face-to-face interaction at branches, but it has not killed the branch..Not long ago, customers came to the bank to complete most transactions. Now, transactions can be completed at the drive-through, on the phone, at the ATM, over a remote deposit capture device, via online banking and through mobile banking. Increasingly customers prefer these avenues for their convenience. Yet, customers still want to speak face-to-face with their banker when they need customer service or when they need advice about big financial decisions. .To accommodate these expectations, Midwest banks have begun to use their lobbies as a strategic tool, to be deployed as it suits the bank's business model rather than as a necessary space built in roughly the same way in bank after bank..Spencer, Minn.-based Heritage Bank, NA, completed its new location in downtown Sioux City, Iowa last year. The location was built around the concept that customers come to the branch for advice, not for transactions..At the beginning of the project, the $447 million bank purchased a space on the first floor of an eight-story building, just down the block from its old location. The facility had a lobby, offices and standing teller stations, but it was too small. It also had another problem. Management knew the technology it had provided its customers was doing most of the work on the retail side of the business. The new space did not need the same amount of retail space as it did lender space.."It is clear to me that we are getting less traffic in the branch as customers set up remote capture," said Tom Geiger, CEO and chairman of Heritage Bancshares Group Inc. "There are fewer and fewer reasons for customers to do transactions in our office. We kept that in mind and down-scaled the branch in the areas where the technology is doing the job. We made it about the lender space. I envision this office as more of a loan production office with a small lobby.".The bank partnered with Minneapolis-based Vanman Architects and Builders to add 1,200 square feet to the space. When the design was finished, only 20 percent of the overall space was given to the lobby, including the waiting area and teller stations. When a customer enters the lobby they see three seated teller stations, staffed by two account services representatives – there are no tellers. The customer sees a cozy waiting area followed immediately by a hallway. The remaining 80 percent of the space is down that hallway, in the area allotted for lenders and customers who are borrowing from the bank.."Our focus is business banking and agricultural lending," Geiger said. "We are not geared toward consumer traffic. So the lobby is small but comfortable. We went away from having so many offices directly accessible off the lobby because we wanted business bankers to be working with a client in a private space.".When Heritage Bank designed the location it also had to determine the entry location in the branch. The branch could have had two entries – one internal entry accommodating customers who come through the building's main doors and one dedicated entry on the street inviting customers to come directly into the bank.."We chose to just have an entry from the main building entrance," Geiger said. "While an entrance from the street would have had a bigger presence in terms of letting people know we are here, we are here for our business customers. These are people who will walk to the branch through downtown Sioux City's skyway system, not usually from the street. So, we decided to give up visibility for an access that was more available to our customers.".Heritage Bank has adapted to technology's reduction of lobby traffic. It finds leads on new business, and even on new depository relationships, by treating the branch as a home base rather than a magnet for customers.."We want deposit accounts," Geiger said. "We just know we won't attract them into our lobby with a sign. We must get out of the branch and find personal references to get deposits.".The change technology has brought to the branch does not trouble Heritage Bank. In fact, technology has increased the bank's potential customer base. "Decades ago we used to consider 20 miles a branch footprint," Geiger said. "Lenders used to sit at their desks and wait for people to come ask for money. Now, with RDC, we consider our branches to have a 100-mile radius.".'Sky Club' approach.BlackRidgeBANK took an even more stark approach when it worked with Fargo, N.D.-based Wild and Associates to design its main location in Fargo. A bank that focuses on high-end business banking and affluent business clients, its lobby is not meant to draw large numbers of customers for cross-selling conversations with personal bankers. "We minimized their lobby because they are not concerned with people visiting their bank," said Mike Wild, a partner at Wild and Associates..As with Heritage Bank, the lobby receives about 20 percent of the overall square footage but there is no fireplace, the flat screen TV is moderately sized and nestled behind one of the only two chairs. When a customer enters the lobby there is no teller waiting to greet them. Instead, that person is usually working at their desk..The $363 million bank's idea is that customers who visit the branch knew the bank before they came. For this reason, half of the remaining 80 percent of the branch is dedicated to a special customer hospitality area. Customers only gain access to this area by invitation.."We built their important clients something similar to the 'Sky Clubs' you see at airports," Wild said. "This room is truly a step up. It has a glass-faced cooler with beverages, a wall-sized TV, custom lighting, and custom wall panels.".Another of Wild and Associates' customers, Gate City Bank, has taken its lobby to the other extreme. At the $1.5 billion bank's main location in downtown Fargo, which is a seven-story, 62,500-square-foot facility, the first floor alone is 8,700 square-feet. The bank dedicates about 2,900 of those square feet to customer space..A bank that focuses on the retail and mortgage market, it has designed its lobby to attract larger groups of consumers, no matter their affluence, by pampering them. The strategy is to provide lounge space that surpasses the comfort of a customer's living room, even to the point of giving the customer the experience of a high-end hotel. "Their concept isn't just to be warm and inviting. You are supposed to feel like you are walking into a Las Vegas hotel," Wild said. In fact, the bank employs an interior designer who decorated hotels in Las Vegas..As with many banks, customers who visit this lounge can get a warm cookie and hot cup of coffee, but then the customer can sit down in plush, leather chairs in front of a large TV which is playing HG-TV rather than the news. "It has lavish tile and vinyl wall covering; it's the most expensive we have ever seen," Wild said. "This is by far the most extravagant way of doing the lobby space. And, it's all done to draw the everyday person, even if they do no banking while there. The lobby never is absent of customers.".Finding the right size.While technology has not destroyed the branch, branches have decreased in size, according to Steve Howlett, a principal at Rockford, Ill.-based PG Architecture. "Bank size is more strategic now, but clicks still are not bricks," Howlett said. "In our experience, the branch is half the size it used to be in the early 1990s.".For banks that are trying to determine how big to build, Howlett said a branch in a town of around 30,000 people can fit all the technology and personnel it needs into 3,000 square feet. Branches in suburbs of a large city are often between 3,500 square feet and 4,500 square feet. And, headquarters or second headquarters tend to be at least 6,000 square feet, he said. (Howlett also noted that more factors than population go into identifying the right square footage.) .Since there is no formula which definitively predicts a bank's need for personnel and space as the business grows, banks can remove the guessing game by creating branches with flexibility in their design, according to Mike Kraft, a partner at Eden Prairie, Minn.-based HTG Architects.."You can create a plan for a 6,000-square-foot facility and incorporate a plan for increasing it to 8,000 square feet," Kraft said. "The neat thing about community banks is that they can turn on a dime; if your branch can be as adaptable as the bank, then you have an advantage. It takes an extra level of thinking but it is very possible to build a branch with four hard walled offices today which can be cheaply modified to accommodate six cubicles in the same space five years later.".Bank managers who make the decision to build a new branch office might wonder whether they should staff up prior to the project or wait until the new office is open. Ben Buckley, president of the Waterloo, Iowa-based Kirk Gross Company, said it's better to wait. "Usually when you build you get some factor of growth that comes from the current customer base and the attention of people in the area. This helps attract staff for the branch that will drive growth," he said. "If you try to attract staff with an old facility, the building makes it harder to make that good first impression.".Buckley also said banks have an opportunity to upgrade technology with very little risk. And, if they do upgrade they gain another advantage in attracting personnel. "Banks in rural markets are more secluded in small communities. The onset of new technology is not as much of a challenge there. If the bank upgrades now, it will take a while for the new wave to reach the Midwest; just as it has for the current technology.".Adapting personnel to technology.Kirk Gross also has found that the change taking place in the banking industry is akin to that experienced in manufacturing. "You still need a place to produce the goods, but technology has reduced the number of people you need," said Buckley, who added that his firm now spends about 20 percent of its time consulting on technology. .Technology also has become a significant part of the consulting process for HTG Architects. The first area of technology bankers ask about is cash recyclers, Kraft said. These automated machines greatly reduce the time needed to process any transaction involving cash at the teller station. The greatest efficiency gain is the machine's ability to quickly count cash for both deposits and withdrawals. This eliminates all the time spent counting cash in the back room and frees tellers to focus on the customer, which allows many banks to combine the teller and personal banker positions, Kraft said..For banks trying to avoid downsizing personnel with technology upgrades, Kraft said banks can increase their business process efficiency by adopting technology like electronic forms and applications. "When I talk to bankers, six out of ten say they have yet to adopt electronic forms, but it is usually on the top of their list," he said.."When banks make this shift, they do save money on paper and on space, but the biggest savings comes from the process," Kraft said. 'It's like doing your taxes. People used to sit with their tax accountant and fill out all the forms. The accountant then photocopied all the paper. Then, in the next few days, a big bundle was mailed to the IRS. Now it's done in a few clicks of the mouse. From a labor efficiency standpoint, there is just less action to be taken. You can't lose a file and you don't need to remove old files to make room for new ones. You even become more efficient in face-to-face meetings with customers.".Despite these gains, the initial cost and the difficulty in bringing personnel on board is the primary hurdle for adopting new technology, Kraft said. To gain employee buy-in and comfort with new technology-based processes, Kraft suggested banks get the new technology in the hands of its employees in a controlled setting. "When we train bank staff, we walk them through mock transactions and we role-play each process repeatedly to take the edge off," Kraft said. "The key is giving them training wheels. Walk them through it as many times as you can, then they will be comfortable with the technology and will be able to help customers without a problem."