Keeping the door open: extending branch hours can lift branch and network performance--but some forms of extended hours deliver a better return on investment than others. Success depends largely on the local market environment.

• Author: Diepold, Brian
• Position: Banking Hours

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Extended hours, either in the form of staying open later on weekdays or providing some accessibility on weekends, is now the norm.

We expect that many institutions will continue to extend hours in the near future, particularly as a response to branch consolidations. Research shows, for example, that the median U.S. branch is open 42 lobby hours a week, or slightly more than eight hours a day, Monday through Friday. Certainly hours vary widely by institution and market, and that raises the question of how to position your bank to take advantage of branch hours.

The assumption in the industry is that these extended hours are necessary to compete for new customers, retain existing customers and, ultimately, improve branch profitability. Yet research also shows that extended hours are not necessarily the appropriate tactic in all markets and under all circumstances. This gives community bankers with a more intimate understanding of each of their offices a competitive advantage in responding to the branch-hours boom in a market savvy, location-intelligent manner.

While extended hours may represent a relatively easy way to increase foot traffic, it is not entirely clear whether this approach is cost-effective or that it provides a sustainable advantage over competitor branches. It has been shown in various studies that longer hours typically equate to higher deposits and loan production, but this comes at a cost, particularly in terms of personnel expense.

Bankers need to have a better understanding of the circumstances in which additional branch hours will yield best return on investment The difficulty in understanding the profitability of an extended branch-hours strategy is that most banks also offer 24-hour online access, call center support, ATMs and night depositories to meet many the same needs as extended hours their branches. More importantly, ended hours are easy for competitors to replicate and therefore may raise everyone's costs for little or no competitive advantage. This is extremely important in the current era of cost cutting--you don't want to add hours where you don't need them.

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Research shows that, in general, national and regional banks benefit the most from offering extended hours on Saturday, as opposed to Sunday or weekdays. Community banks, on the other hand, achieve better performance from extended drive-through hours on the weekdays. But...