Is that branch really needed?

• Author: Mambrino, Vanessa

as branch traffic dwindles, some banks have been cutting the size of their network. But, don't purge locations just to save money. Instead, review your overall delivery system with an eye toward how to best support the bank's value proposition and strategic goals.

EVER SINCE CUSTOMERS WERE GIVEN THE OPTION IN THE EARLY 1980s of completing simple banking transactions from the comfort of their own homes, bankers have been questioning the branch's role in the modern retail delivery system.

The answer has changed over time, and the pace of that change has clearly accelerated in recent years--driven by new innovations in technology and a decline in the number of customers using branches to conduct everyday banking. Branches present bankers with a conundrum: Customers say that they need the channel for activities such as account opening. Nevertheless, it is an expensive channel to maintain in light of the current pressures on retail banking profitability.

Current state of the branch network

This conundrum has led to a number of changes to bank branch networks across the country. The total number of bank branches in the United States has decreased for five years in a row, from 99350 branches in 2009 to 96,339 branches in 2013. Two to three branches were dosed for every new branch opened in 2013, and it is likely that many bankers reading this can think of at least one or two branches in their own network that they would close tomorrow if they could.

Many bankers can also identify obstacles to carrying out their own ideal branch network overhaul: This branch has an expensive and impossible-to-break lease; that one is the only bank branch of any kind in its market, etc. "It's a real challenge for the industry," says Rick Claypoole, senior vice president and director of retail products and marketing at Cadence Bank, Houston. "You have to continuously monitor the performance of your branch network and the evolution of local economies and determine how to optimize that network. The real question is: How do you best leverage them?"

To determine how to leverage what you have, you must analyze the current state of all channels (not just branches), prioritize certain areas over others as part of a multichannel delivery strategy, and then execute on that strategy--even if the execution process involves small, slow steps towards the ultimate goal.

MountainOne Financial's new location in Pittsfield, Mass., is one example of a new way of thinking about branch delivery. MountainOne offers banking, insurance, group benefits and financial advisory services to its customers (though some lines of business retain separate brands).

MountainOne Bank, (asset size...