Today’s Financial Brand post by Jeffry Pilcher is the best article I’ve ever read on branch design. If you are building or remodeling mega-branches, it’s an absolute must-read.

But as I read it, I couldn’t help thinking about that old saying about the deck chairs on the Titanic. Sure, IF valuable customers continue to visit branches, and IF those customers are willing to be pitched products as they rush through their errands, and IF you train/compensate your staff to effectively sell, and IF you can still afford the half-mil or more it costs to run each one, then by all means build U-shaped branches to maximize sales interactions, hire world-class greeters, and install engaging merchandising displays along the snaking path to the teller windows in the back.

But no matter how many design awards your branch receives, it won’t change the megatrend: the future of financial services is outside the branch. Nearly every profitable business line is already sold direct: credit cards, prepaid cards, insurance, mutual funds/investments, car loans, mortgages, commercial loans, and, more recently, even savings/CDs and checking accounts.

And now that ATMs, PC scanners and mobile phones handle deposit-taking better than the friendliest teller (note 1), the traditional branch has no business case. Sure, spacious and attractive branches in high-traffic areas are great marketing tools. They reinforce your brand, show your stability, and I’ll have to admit, they are mighty convenient for dropping off paper checks and getting free cookies.

But that model is too expensive. I agree with Mr. Pilcher that branches are far from dead. But the future branch is likely to look more like an Edward Jones or Allstate office, not the thing of beauty shown here. There may even be more of them (Edward Jones tallies more than 10,000), but they won’t look like these pictures. 

The bank/CU branch will morph into small storefronts sprinkled throughout the community staffed with a few people heavily incented to produce revenue. Routine transactions will be handled by (mostly) self-service ATM/kiosks. Unlike the Titanic, the sinking of the mega-branch model will be slow. And the ultimate brick-and-mortar mix will be much more complicated than my simplistic take on it here. But branches will shrink, tellers will be phased out, and the online/email/mobile channels will handle just about everything. Just ask USAA. 

Notes:
1. Remote/ATM deposit capture is superior to most teller-assisted deposits because you not only save a trip to the branch, but also get immediate real-time confirmation that the deposit has been properly recorded. You can make the deposit earlier (as soon as you receive the check), you get a copy of the image to store indefinitely, and in the case of remote capture, you can even hold on to the original check as proof of deposit.
2. We wrote about the Demise of the Branch in 2006 (OBR subscription required).  
3. Photo credits: EHS Design.