Even if your local bank branch is looking a little different these days, the bank branch is here to stay.
“The community banking model isn’t ever going away, it’s never going out of style,” said Mindy Lehman, vice president of government affairs for the Maryland Bankers Association. “A strong bank that is very connected to their community is something that is vital to community and will continue to be so.
“There are 1,600 bank branches across the state, which is a pretty strong presence, and we expect it to continue,” Lehman said. “What the branches look like themselves will evolve.”
Despite 21 banks becoming inactive in the past three years in Maryland, experts say bank branches will still hang on in the future, but change and adapt depending on the customers’ needs. Many bankers are changing their ways for customers by improving customer service response times and making customer relationships a priority.
“Banks are evolving, but even if they merge, they usually keep same number of branches,” said John Hall, senior vice president of public relations at the American Bankers Association. “Branches are evolving just like consumers are evolving … more people are adopting mobile banking, more people are using other alternative forms of banking.”
Most people prefer the option of having a physical bank branch, even if they deposit their checks online or withdraw money from an ATM, according to a study by the American Bank Association. Millennials even prefer to go to a brick-and-mortar location when they need to get expert advice and deal with more complex financial tasks, such as taking out loans and mortgages.
“Branches are still an integral part of customer choice,” Hall said. “Everyone wants the choice to have one, and while they may be getting smaller and more efficient, they will remain a choice.”
Even though 32 percent of adults 18 and older prefer banking online, 17 percent prefer visiting a physical bank branch over using their smartphone or an ATM, according to the ABA study. In Maryland, customers are looking for more updated, high-tech branches and more ATMs, but also more personnel working in the branches.
“Online and mobile banking are features that complement, but do not replace, branches,” said Nessa Feddis, ABA’s senior vice president. “The design of branches may change, but as the survey numbers suggest, they’re here to stay.”
Bank branches have changed from their traditional bank-teller-behind-a-gate images from years ago.
“There’s no question though that bank branches are evolving to meet customers’ needs and preferences,” Hall said, citing increases in technology, electronic banking and self-serve stations in bank branches. Universal bankers are becoming more common as well – these employees can aid customers with their loans and investments, along with the typical transactional duties of a teller.
PNC’s recently revamped branch on North Charles Street is a testament to that – the branch is spacious and bright inside, full of desks and tables rather than ominous teller windows. Bank employees circulate, iPads in hand, ready to provide a variety of services. The Baltimore branch is one of many banks in Maryland looking to keep up with technology and banking trends by adding more roaming employees, self-service kiosks and technology inside the branch.
Banks are also facing numerous changes in federal regulations that require branch adjustments.
“There have really been sweeping regulatory changes at the federal level – there are new regulations almost every month, thousands of pages of compliance procedures,” Lehman said. “As a result, banks have tripled, doubled their compliance staff.”
This increase in regulations and staff and the cost of handling it has been a driving factor for many of the bank mergers in Maryland, Lehman said. For the very small bank branches, around 10 employees or fewer, however, changing and adapting isn’t always feasible.
“In today’s world, it’s really hard for that particular business model to survive,” Lehman said about the smallest local bank branches. “It’s harder for teeny, tiny small institutions to attract capital because the market has changed.”
While 28 Maryland banks have been sold or merged with other banks over the past five years, small bank remains critical to small towns and cities. Most of the time, when bank branches merge or a smaller bank is acquired, branches will remain open for a period of time in order to continue to service customers in that area.
“Small banks are really the cornerstone of small towns and communities in America. They often specialize in making loans to small businesses, which really help communities thrive,” Hall said. “There’s no question there are fewer, but all communities need banks of a diversity of sizes.”
These smaller institutions usually provide more niche services that bigger banks can’t always provide.
“Some institutions are very specialized in business banking services, some in residential mortgages, some in consumer banking,” Lehman said. Bank branch services then, including level of technology and types of employees, depends on not just the market but also the smaller-scale customer environment the bank serves, according to Lehman.