EDITOR’S NOTE: This Q&A features comments from: Chad Abernathy, senior vice president, chief retail officer at First Clover Leaf Bank; Darryl Collins, regional retail banking director at Commerce Bank; Charles Daily, Fairview Heights market president for Providence Bank; Julie Laurent, senior vice president, Illinois regional manager for First Bank; and Rob Schwartz, senior vice president – retail banking at the Bank of Edwardsville.
IBJ: Bank lobbies used to be busy places but they don’t seem to be any more. How has foot traffic changed in the industry?
Daily: I’ve been in banking for 40 years. I started as a part-time teller in 1970 at Lincoln Trail Bank in Fairview Heights. There would be four or five tellers working on a Saturday morning. When it was time to close the bank at noon, lines of people depositing their Social Security checks were out the door. We had to squeeze the customers in so we could lock the doors. Today, if you walked in there on a Saturday morning, there might be two or three people in the teller lines.
Schwartz: I don’t go back that far but I’ve heard stories of on a Friday pay day there would be lines at the bank to the point that tellers would be there ‘til 7 to accommodate people depositing their checks. Over the last four years, the banking industry has sustained a significant drop in teller transactions.
IBJ: What’s changed?
Daily: For one thing, there are many more financial institutions than there used to be. Back in the ‘70s savings and loans were not legally authorized to offer checking accounts. All the people who had checking accounts had to go to banks. Back then, Illinois law didn’t allow for branch banking so everyone went to a very few locations. Another big factor was that credit unions used to have to have a “common bond” requirement. That was eliminated so you added all the credit unions offering checking accounts too.
Abernathy: I started in banking in 1995. There were still so many people processing checks and receiving payroll checks and going to the bank to make those physical deposits and to get cash. Today with on line banking, you don’t have to go to the bank or call the bank even to transfer funds. Your pay check goes in by direct deposit. People use their debit or credit cards instead of cash and utilize on line banking and mobile banking. At Clover Leaf, our physical teller transaction volume is half of what it was five or six years ago but yet we have more customers and we do more global transactions. Transactions today are electronic rather than in person.
Schwartz: It has been going on for a while but it has accelerated in the last five years. There’s mobile banking, on-line banking. We have remote deposit capture as many banks do, where you can take a picture of your check and it goes into your account. You don’t have to go into the bank. It’s a direct deposit world. People want everything on their phones and they’re using that avenue rather than coming into the branch. We have to embrace the fact that more and more people aren’t going to want to come into the bank. If you want to open up a checking account in your pajamas at midnight, you can do that. This month we’re going to roll out an on-line mortgage application program.
Laurent: It’s something that’s hitting all financial institutions. We want to meet the needs of our clients. People are working longer hours and they want the convenience. They want to be able to bank electronically. But, I really think it’s made us better bankers. We have to make a much more concentrated effort to make our interactions with our clients more meaningful when we do have that opportunity. When we have contact we want to make the most of it.
Collins: I think we still need to have physical locations but clearly people interact much differently than they used to. Between mobile and on line, the number of people who come into the branch to do the traditional things has really declined. The reason people used to have to come every couple of weeks was to cash or deposit checks. Now all of those things have moved to direct deposit or other forms of payments.
Daily: So, it’s been a combination of technology and the explosion of the number of financial institutions and branches. Today, mortgage applications, home equity loan and consumer loan applications can all be done on line further eroding foot traffic — plus, electronic banking. This is a trend that’s going to continue.
IBJ: Is foot traffic important?
Collins: It’s very important because that’s how we establish relationships. When people came in on a frequent basis you could talk to them and create connections. When people don’t come in as frequently, it’s a challenge for us.
Schwartz: It’s a huge concern, particularly with the community banking world because we’re a face-to-face industry. We would rather have customers come into the branch because it helps us build relationships and provides us with an opportunity to offer them products and services. But, we have to change with the times.
IBJ: How do you deal with it?
Abernathy: I think there will be a reorganization of how the branch staff and how the branch network is utilized. Eighty-five percent of folks who want to open an account or take out a loan still want to come into the branch to do those things. They want that personal contact for that. After that, they want a place to resolve issues. That’s really where the role of the branch will come in — less at the teller counter for simple transactions, more for problem resolution and new account acquisition, whether it’s loan or deposit.
Collins: We can’t fight it. We have to respond to it because that’s what customers want. People tell us they want to conduct business when and where they want to. An interesting by-product of the digital era is people interact with their banks 15 to 20 a month, whereas before it used to be three or four times a month. The reason is because they are using all the channels. People are on-line checking their balance, transferring funds. They’re on their mobile device or iPad checking bill pay. So, instead of the branch being the face of the bank and how we interact, now we just come to you different ways — through your phone, your tablet, your computer.
Schwartz: We’re not going to be able to bring foot traffic back just because people — and particularly younger people — simply aren’t going to be coming into the branch. We probably won’t have as many branches as we move along, but they will be still a critical part of banking. We’re going to continue to be out and supporting the community; have our people out at activities. Maintaining a physical presence is important. Millennials are not going to set foot into a branch. They’re going to do everything on line. But, the reality is that as they get older and they have life changes and life challenges, they’re going to need to talk to somebody. They’re going to need a local presence to help with their mortgage needs, their investment needs, just their regular financial needs.
Abernathy: We have to utilize new strategies and find different ways to interact with the customers. In December 2014 we launched what we call our CAG program, a customer acquisition and growth strategy, and we’ve been using direct mail. It’s been very successful for us. We’ve doubled our deposit account openings. So, while my in-person existing account transactions have slowed down, my new account and household growth has doubled.
We have a kids’ club account where young children are in a savings account. It teaches them about savings. It incentivizes them to save and also to come into the bank. On their birthday, for every inch they grow from their previous birthday, we give them a dollar. We have a swim party and a Christmas event every year for everybody in that account. There are a lot of perks for having that relationship with us.
Laurent: I think staffing is key in managing this evolution. We want to make sure that our branches are staffed appropriately. That doesn’t necessarily mean less staffing because you have less foot traffic. It means better trained employees. Employees who can do more things — not specialized in just one area. You want to have someone who can open a new account; run a teller transaction; take a consumer loan application; whatever it might be. Having the right people — not just the right amount of people — is key.
And, we need to think outside the box in terms of communicating with our clients and doing it in a more proactive way. First you need to understand what your client base is; who they are; how their needs may have changed. Then, reaching out to them through multiple channels — a personal phone call, emails, letters. We do phone calls with clients just to reach out and touch base with them. It becomes more proactive with our team to make sure that we reach out to our clients in other ways. The playing field has changed but, if you do it right, the client can still feel like they’re being taken care of, appreciated and we’re taking time with them. We’re seeing success with that.
Collins: It’s all about being responsive. We have to make sure that we have channels that people feel comfortable with. We still have customers who feel very comfortable with traditional channels so we have to maintain them because it’s still important to a significant group of our customers. Again, it’s not a single thing. No one is going to pick one thing exclusively. People will find what works best for them. If you think about it, the way it was before was really pretty inconvenient. You were limited to whenever the bank wanted to be open. ATMs helped that a little bit. But, in the last seven or eight years, as mobile apps have exploded, it’s more convenient than ever. What I like is that we used to just be bound to interacting with customers in those 8 to 5 hours by location. Now we’re dealing with folks at 2 in the morning or 8 in the evening. They can be on vacation and they can check on their accounts. So, we’re still there; we’re still providing great service and that’s really exciting to me. As we’ve responded to customer demands, it’s made us much more responsive and flexible and that’s really what’s kind of fun about it.
IBJ: Is being out in the community more important than ever?
Abernathy: All of our officers are involved. We have what we call our Green Team that participates in all kinds of volunteer activities. There are a lot of us in the Rotary, the United Way, YMCA, Edwardsville Foundation, I mean the list goes on and on.
Collins: Our people have to be out, because it’s our community, too. We live here. If the community doesn’t do well then the banks aren’t going to do well. So the banks have a vested interest in making sure those communities are strong because that makes us strong. So, you have to have employees out there and engaged and involved. We take a lot of pride in the things we do in the community — not just philanthropy which is huge, but volunteerism and engagement.
Schwartz: We really encourage our people to get involved and we promote that as well. We have volunteers who work at events out in the community; we support the communities and organizations financially; we’re on a lot of boards. We talk a lot about this particularly with our front-line people and encourage them to get involved with something that they’re passionate about — something that’s going to help the community because it’s the right thing to do and, the more people you meet, the more people will know that you’re with the bank.
Laurent: The folks that bank with us are the folks that we sit next to in church or we’re on a school board with or other civic organizations. That gives your clients a chance to see you out in the community as a pillar of the community. I think that’s key in keeping your name and a presence and a comfort level. But, I think we’re going to see technology continue to evolve. We have to stay proactive. Banks that are focused on building relationships and strengthening relationships rather than product pushing are the folks who are going to survive and grow. You have to change and you have to continue to grow. If you do that, I think you’ll stay a strong competitor in the market.