Banks Branching Out With Technology

By Elizabeth Bennett  |  Posted 2004-11-01 Print this article Print

Bank of America and its rivals are trying to attract customers to their branches -- a channel the banking industry hoped would become obsolete.

On a little more than 10 blocks in midtown Manhattan, 7th Ave between Penn Station and Times Square, no commuter, sports fan or theatergoer will ever have trouble finding an ATM, much less a place to cash a check, apply for a mortgage, or rent a safe deposit box. Along this half-mile stretch of asphalt, there are three Bank of America branches, three Chase branches, one branch each from Citibank, Washington Mutual and HSBC, and three regional and community bank branches -- 12 branches in all.

But this slice of the Big Apple could be Any City, USA. Retail banks are sprouting up across the country and the ever-growing acceptance of Internet banking hasn't slowed the pace. Over the past six years, national and regional banks built around 5,200 new branches, or almost one every hour around the clock of every business day. At the end of 2003, there were 67,390 bank branches in the United States, according to the Federal Deposit Insurance Corp. The FDIC says that Bank of America, with 5,790 branches, operates the largest branch network.

Banks are opening "way too many" branches, says Jerry Silva, a retail-banking analyst at TowerGroup, a research unit of MasterCard International.

According to Silva, banks now must find ways to get their branches to stand out from the crowd, and many view technology as a differentiator. Datamonitor, a London-based market research firm estimates that U.S. banks will upgrade and renovate 30,000 of their branches, or 26 percent, between now and 2006, and boost spending on branch technology to $1.4 billion from $800 million.

To lure customers, Bank of America, for instance, has installed 80 online kiosks in 46 of its Northeast branches. In addition to standard transactions, like making account balance inquiries and fund transfers, customers can use the kiosks to pay bills, check credit card payments and activity, research stocks and make trades, and print statements. According to Bank of America, the kiosks have particular appeal in low-income areas, where customers may not have ready access to the Internet.

Wells Fargo Bank, on the other hand, is experimenting with an ATM that accepts envelope-free deposits. Customers deposit cash or checks into a slot. The machine then counts the cash, examines the bills and checks for counterfeits. A digital image of the check is then taken and the system verifies the amount matches the one the customer keyed in. The ATM prints a receipt with the check's image. The new service, which is currently offered by a handful of banks at about 20 machines across the country, is likely to be popular with customers who are already comfortable using ATMs for deposits or like the digital image's immediate proof of receipt.

Commerce Bank, a fast-growing bank out of New Jersey, features a couple of slightly less high-tech options – such as coin machines at each of its branches and staying open seven days a week. Commerce has stated that it doesn't intend to make any money from the fee-free coin counters, which customers and non-customers are invited to use. The machines are attractive to coin changers who don't like paying the fees charged by commercial coin machines.

It's a fever-pitched scramble to upgrade and integrate systems for optimal selling opportunities. The rub is that there always will be banking customers unmoved by a friendly smile and faster service. Many people simply bank at a branch closest to their home or workplace, according to Lehman Brothers banking analyst Jason Goldberg, and if Bank of America is 50 feet closer than Citibank, there isn't a whole lot Citibank can do to pull customers across that chasm.

But they're sure going to try.

Senior Writer
Elizabeth has been writing and reporting at Baselinesince its inaugural issue. Most recently, Liz helped Fortune 500 companies with their online strategies as a customer experience analyst at Creative Good. Prior to that, she worked in the organization practice at McKinsey & Co. She holds a B.A. from Vassar College.

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