Branches: too many? or not enough?

• Author: Hall, Robert
• Position: Marketing Solutions

"One ship drives east and another drives west with the self same winds that blow. Tis the set of the sails and not the gales which tell us the way to go."

Ella Wheeler Wilcox "The Winds at Fate"

Not too long ago, everybody knew we had way too many banks. Soon there would be just a dozen or so. Huge mega banks only. Maybe a smattering of little no-scale banks. Then a little later, everybody knew we had way too many branches. Brick-and-mortar is what they were. Who needs them? Everything is going virtual. Just a matter of time until the old, location-attached folks die off, and we can close their branches. Maybe save one or two branches to keep the rain off the high-tech kiosks.

In some ways, it's not quite sporting to look back at what once were bold, seemingly plausible predictions and point out how badly they missed the mark. But reality is stubbom. During the heyday of branch closings, it was mainly the community and regional banks with modest technology but more stable, service-oriented branches that racked up higher growth. These community and regional banks also and stole market share from those large banks that dosed branches in favor of technology.

Now, many of the large banks are getting religion about branches. As the evidence accumulates about the branch role in deposit- and market-share growth, one large bank after another has announced aggressive branch-opening plans.

At the same time, some credit unions-a sturdy if unheralded source of competition for banks-are laying out a much lower cost strategy for branch expansion: shared branch facilities. Like shared ATMs, shared branches offer major savings (potentially in the 50 to 60 percent range) but without sacrificing customer convenience.

What this strategy says is: "The branch is a commodity." A branch is a branch is a branch. This at a time when the "more branches" strategy of some large banks says the opposite:

The branch is the brand" Or at least, 'The customer experience at the branch is the brand."

So, which is it?

That binary question itself is part of the problem, as it was back when we had too many branches and now again when we either do or we don't. The right questions are...