Although many banks have been scaling back their physical footprint for years, others are bolstering what they have.
Take Citibank’s Fairfax branch, which reopened its doors a weeks ago. It is no spartan outpost with a handful tellers for quick transactions. The sleek modernist office includes the brand’s Citigold Lounge aimed at higher-end clients along with space for those customers to work and host remote meetings. The branch even staffs wealth managers.
Why? Because new research shows that bank branches are not necessarily the money losers they were long thought to be. In fact, some branches have outsized sales gains — and are attractive to customers wary of digital banking.
Lisa Deloney, the California market president for New York-based Citibank, said it aims to set up in the “right place for clients” instead of taking the Starbucks approach.
“As customers are coming back into our facilities, they are looking for not necessarily traditional banking transactions but they’re looking for advice and guidance,” Deloney said. “One of the things that we’re trying to accomplish in this location is a sense of, ‘We’re here for you when you need it’ — whether you need advice for a transaction or to sit in our Citigold Lounge with a cup of coffee and do some work on the internet.”
A body of research published by McKinsey & Co. indicates that the banks successfully emerging from the Covid pandemic downturn are adapting around customers who have largely turned to digital services.
And while there are of course fewer branches around than there used to be, the ones we have are very often doing more — and different — work than before.
Rethinking the vibe
Deloney said Citibank’s decision to invest in this location ultimately boiled down to a question: when customers come into a bank, what are they looking for?
“This location has been open for almost 80 years and for the last five years we have been thinking through what we want to be on arguably the best corner in Los Angeles,” she said. “We knew we wanted to absolutely stay in this location, but we knew we needed to rethink and reimagine what we could be in the Fairfax community.”
The 6,400-square-foot location was gutted and now sports a modern, clean look and an inviting lobby for customers. It also now includes a trademark Citigold Lounge, which the company offers to certain customers as a pitstop during hectic days — they can grab coffee and take a breather, use the facility to charge devices or work remotely or even host meetings with other colleagues on the move.
Additionally, Citi has staffed the location with more specialized personnel, in particular advisers for wealth management.
“The need for wealth advisers is in very strong demand,” Deloney said. “As we’ve come out of the pandemic, people are cash rich in a lot of cases and they’re looking for what to do.”
This type of investment into a physical bank branch may run counter to conventional wisdom.
Since 2017, there has been a 20% reduction of physical bank locations in developed markets worldwide — in that timeframe, 9% alone were closed in 2021 — according to a McKinsey article published in June. Additionally, more than 40% of core banking retail sales originated digitally in those markets in 2021.
Growth leaders
In Los Angeles County, banks that have shrunk footprints in recent years include household names like Wells Fargo and local brands like Bank of Hope, Cathay Bank and Hanmi Bank.
While many banks experienced sales declines since the pandemic despite the digital growth, McKinsey reports that growth leaders in those markets increased total sales by 10% by largely holding their declines in branch sales to single digits.
And around 37% of the examined physical branches posted growth of 20% in 2021.
“At many banks, productivity is a sticking point,” the article states. “Sales per staff have declined by 25% since 2017, driven by substantial decreases in simple products like savings accounts, credit cards and personal loans. In contrast, sales of more complex products, such as mortgages, increased. A key differentiator is banks’ ability to maximize each location.”
According to McKinsey, the number of universal bankers and advisers — such as those wealth management professionals Deloney highlighted — at banks has increased by 48%.
“While each institution must arrive at a unique model for physical channels, a common theme has emerged: the inversion of the distribution pyramid,” the article adds. “Branches and call centers no longer dominate as the catchall channels fulfilling customer needs, leaving digital to fulfill a subset of activities for a subset of customers. For an increasingly mainstream cohort, mobile has become the go-to, with physical channels becoming brand ambassadors.”
Here for clients
Citibank’s expectations for its new and improved branch seem to align with this research. And to hear it from Deloney, many of the branch’s longtime customers repeatedly sought updates on when their home location would reopen.
“What we’re seeing is the loyalty of our client base is very strong. Our clients didn’t leave us,” she said. “The benefit of doing this investment is that we’re attracting a tremendous amount of business from the community and our customers are recognizing that this is a refreshing new way of servicing their financial needs and also creating a totally different vibe.”
Although she would not discuss specifics and there aren’t any scheduled ribbon cuttings on the horizon, Deloney indicated that this likely won’t be Citibank’s last such investment in California.
“We are looking at some locations,” she said, “but we don’t have anything underway right now.”
