Building a Rightsized & Resilient Branch Network

In this Believe in Banking Podcast episode, Sean and Gina share timely insights from speaking and participation at the financial industry’s leading conferences. Specifically, they discuss demands on banking and credit union leaders relating to their branch networks and how planning for saving and growing at the same time is essential for institutions of all sizes. To make the most of opportunities that branches bring, many institutions have been active in either acquiring small networks or building new locations in growth markets. Addressing the latest generational data, they discuss how people from all generations are seeking in-person advisory services at the branch as everyday transactions go digital. Finally, they look at examples that range from Chase to Guaranty Bank in Mississippi and the powerful combination of the right market with the right staffing and the right physical presence. 

Text Transcription

Intro: This is Believe in Banking, a podcast series for decision-makers, influencers, and leaders featuring experts taking on the financial industry’s most pressing issues with insight and empathy. The podcast features information and conversations designed to enlighten and empower. Here are your Believe in Banking hosts, Sean Keathley and Gina Bleedorn.

Sean Keathley: Welcome to our podcast for Believe in Banking. I am Sean Keathley, CEO of Adrenaline.

Gina Bleedorn: And I’m Gina Bleedorn, chief experience officer at Adrenaline.

Sean Keathley: Gina, you’ve been busy on the speaking circuit. Why don’t you talk to our listeners about what you’ve been saying and hearing as you’ve been talking to bankers really from Las Vegas to Boston in the last few months?

Gina Bleedorn: Well, it seems in-person is back and was missed. The in-person connections that happen at industry conferences are something that people seem to be flocking towards, having not had their fair share of it in the last couple of years. And we’re finding more than ever, bankers want to connect with one another, number one. And number two, they seem very serious and focused on learning, and that is really exciting. They don’t just want to come to a conference to go somewhere and get out of their day job. They really want to understand what is going on. And what is very clear in relation to the branch network specifically is that, in a way, banks and credit unions of almost all sizes are looking for a plan.

At this point, they know they need to do something, depending on the size and state of their network, they might be more evolved and optimized or less, but whether they’ve been transforming their network in certain ways for years or they haven’t even started, everyone is trying to figure out, “What is my next best move? Where do I save? Where do I grow? And how much do I need to save in order to grow? And what does that look like?” So it’s a lot more than just what market am I in, but how do I go in that market? What are my branches look like? How big are they? How much self-service are they? And do I have small versions, micro branches, ITM onlys? These are all of the questions that everyone is trying to figure out. But it seemed one common theme is that when it comes to the branch network, there is a lot of planning reacting to what’s happening the next year and what real estate opportunities may be on the table, but there is not as much long-term planning as they want or there needs to be.

Sean Keathley: Is it fair to say that in the current environment, do nothing is not an option?

Gina Bleedorn: Yeah, I think that’s where we’ve finally gotten to that. It used to be, “It’s not broke, don’t fix it for some.” I really think everyone is there at this point. If you have existing branch infrastructure, unless you’re very small or very new, it’s got to be modernized at least to some degree. And the quest to grow is about as competitive as it’s ever been in the race for scale. So it is on everyone’s mind, how do I grow and use the branch network as a growth mechanism? I think a lot of the fears about are they becoming less important, is the branch network going away have been alleviated, especially coming out of the crisis we just had, or you could call it, some call it a crisis, some call it a mini blip of sorts. But what happened earlier this year actually strengthened the perceived value of the branch network.

So the National Bureau of Economic Research published that the results of the stock prices plummeting actually suggest that digital banking, that enabled some to grow faster and get uninsured deposits, came out looking like hot money that changed its course when economic conditions worsened. And so those that had more stable infrastructures, inclusive of established branch networks and more community ties and relationships with people, especially in person, were those that fared much, much better coming out of this crisis. So it’s doubling down yet again on the idea that growth via physical footprint is a viable strategy.

Sean Keathley: I agree. I’ve talked to several bank CEOs in the last 60 days. Many of them have been active in either acquiring small networks or building new locations and growth markets. The theme I’m hearing, they’re looking for a combination of the right market with the right bankers, and the right physical presence, that is the winning combination. And you look at Jamie Dimon and everything Chase has been doing, they just had their investor day where they’re being asked about their love affair with branches. They’ve invested heavily through the pandemic and continue to say it has done exactly what we thought it would do. It is the major source of origination of new accounts. You see that 50% of mortgages in a bank that has some of the best digital capabilities in the industry is coming from the branch. Their credit card business is very important to them.

Three out of four of the new cards are opened in a branch environment. They have talked, Gina, about the branch being the front door to their business. Go down to Hue Townsend at Guaranty Bank in Mississippi. Couldn’t be more different in terms of scale. I’d argue the branching strategy is similar on a state level. Hue is trying to be the community bank of his state, and he is doing it by hiring amazing bankers that do handshake banking in the towns they serve. And he is moving into new markets through acquiring banks through new construction. And he is reviving branches that are tired and key legacy markets. And so you could argue that he has taken a page out of the Jamie Dimon playbook and doing exactly what you’ve talked about, all in this very difficult environment where the rates have been a challenge and there’s regulation, and just all the headwinds. These folks are succeeding.

Gina Bleedorn: There’s also a maybe unintuitive generational preference that’s happened. You might assume older generations want to go to the branch more. But actually, the data over the last two years has shown that the number one increase in usage as well as the overall cohort using lobby and drive up more than any other generation is actually the millennials. So millennials are in upper 20s to early 40s now. They want to get in-person advisory services at the branch. And further, the generation behind them that many have not started, maybe to think about too much, but Gen Z, they actually perceive the branch a area for advice even more than the millennials. So the boomers still look to it mostly as a place for transactions, which is the very thing that really bankers want to come out of the branch because they’re not value additive.

What the newer generations are looking for is exactly what you want to happen in-person relationship advisory services. But that does set up for another challenge from the bank and credit union side, how do I staff with the right people and the right mindset with the right training to deliver on that? And that gets into some of what you were just saying, Sean. It’s not just about getting in the right markets, it’s finding and recruiting, in a much more competitive recruiting environment, the right banking talent for that market to deliver on those wants, needs, and now even expectations, especially of Gen Z and millennials.

Sean Keathley: Well, I think you’ve captured it is good news with the catch, right? So these branch infrastructures aren’t obsolete in nature, but this new generation is saying up to a third of Gen Z, I mean a third of the whole market, and Gen Z says, “That’s where I go to get my advice.” So you need to have advice-driven people there. Smart bankers, it’s not your order takers sitting there ready to do a transaction, and with maybe a fourth of millennials thinking the same way, up 23%. This is a big swath of the country that are digitally enabled. They’re educated on all the things mobile can do for them, yet they see the branch is the place where smart people tell me what to do with my money. That is the requirement then on the Bank of Credit Union to staff it with such people. And that can be a real challenge, for sure.

Gina Bleedorn: Accenture’s reported, actually, in the last year, the consumers across all generations have used the branch more than any other channel to open accounts to get advice, and to acquire new products. And I think it’s such that people realize that finances are complex enough that they need a little bit of help, and they want to go in person. But the same Accenture report also started to say that when banks and credit unions were actually marrying their products and services relevantly to life stage, and they actually called it life centricity, they were far more successful in connecting with people. And they’re saying that 97% of banking touchpoints are now remote. And so, as a result, banks have become more remote and thus less connected to people, that’s been eroding trust. And some have advanced personalization digitally, but it’s not replacing the in-person relationships. And especially, I tell many community banks and credit unions this regularly when they say we want to go digital.

Gina Bleedorn: That is a scary and risky proposition because you can’t go digital and compete well with Chase or with the FinTechs out there who have built very sophisticated niche products that are absolutely removing friction in the customer experience, making it super easy to acquire their spending bazillions of dollars on marketing and new customer acquisition. You can’t compete digitally as a community institution. So you’re going to need to double down on that community aspect that localization if you can get the right people with, again, the right mindset shift of I’m here to help in a life-centric way, the people I’m talking to that starts to become a way to create real stickiness that lasts and double down on especially what in-person connection can do for you.

Sean Keathley: That reminds me of a story about Frost Bank from 15 years ago, and it’s a strategy they’ve stuck with that I think I would use for today’s listeners as good advice. We were doing branch modernization for them, and the request for that work got to be more than the bank could handle. The branches that were modernizing were doing better in every possible way. The best bankers wanted to work in those branches. The clients were happier, or the cross-sells were up. And so the way they really worked out a program over multiple years to decide which markets to do next, they told the bank teams, “When you get your team ready, hired, and trained, we will come update your space.” It will not be in reverse. And I think about that and how well that’s served them, especially as they’ve grown their footprint from San Antonio to Corpus Christi to Bernie. Now big investments in Houston and Dallas, they’ve put local bankers in the branches. And so you think now, Gina, to maybe what advice we would give to people. It’s very similar.

If you are going to invest in a new facility to be ready for everything we’ve talked about, make sure your bankers are there trained, hired, and ready, and understand the design of the space, understand the type of visits they’re going to receive, and get them the training to help people in the way they’re expecting it.

Gina Bleedorn: So at one of my recent speaking presentations, I talked about being both right-sized and resilient at the same time. And I actually began it by a quote from a futurist from the ’70s called Alvin Toffler that no one likely knows or remembers. But I love the quote, “You’ve got to think about big things while you’re doing small things, so that all the small things go in the right direction.” And that really sums up what we see. A lot of small things going maybe without a North Star ultimate direction. Going back to what I said earlier about having a plan is critical, but there’s a simplified way to think about how to make a plan. And that is being number one, right-sized, and number two, resilient. And so the right size aspect, really, that’s the biggest issue that most everyone with existing branch infrastructure is facing today.

The branches are just too large, and they are not maybe in the right place in the right market. So you have two large branches, but also maybe too many branches. So your footprint is not right-sized, and your actual square footage is not right-sized. So when you’re optimizing, that’s one of the first things you’ve got to think about. Right-sizing the just having enough perceived presence in a market to reach critical mass to be convenient enough but not be bigger than you need to be. But then, on the resilient side, that’s about being designed for what banking is now for. It is yes, looking nice and feeling modernized in a place that people actually want to go into with nice lighting and nice branding, but also being configured for an experience that supports what they want with open plans, supporting dialogue, having local customization and local relevance, and of course, enabling conversations to take place. So kind of a quick branch optimization cheat sheet. Being both right-sized and being resilient should the two key components of having a North Star plan and roadmap for transforming the network.

Sean Keathley: Gina, I think that’s brilliant. I’ll add to it, and don’t add to your problem. How many times do we see community organizations designing and building new facilities without really at the North Star, or maybe their entire fleet of locations is not in the right place? So I think you’ve got to make sure that all net new work is in the spirit of the new strategy. Gross square footage is the biggest driver of cost period, to your point. Whether that’s a combination of too many locations or locations that are too big, how many organizations do we know about? Who have acquired locations over their history? And maybe in the collection of those acquisitions, they have three or four headquarters of the little banks they bought that are just grossly underutilized. I think to your point, you really have to have a plan, and oversized branches and too many branches makes it very difficult to do what we’re talking about. The investment does not work if you’ve got unutilized space.

Gina Bleedorn: And to that point, Sean, maybe the biggest takeaway here is you’ve got to start somewhere. And more importantly, you’ve got to start. If you get paralyzed by wanting perfection and having the whole big picture figured out, you’ll never begin. It is a journey. And so if you begin with at least getting stakeholders together to some extent and establishing the best vision that you can, you then take steps towards that vision, one side at a time, or a few sites at a time, or a market at a time, and then document what you’ve done, iterate, and learn from what you’ve done, and go into the next wave, whether that’s annually or every 18 months. And what will happen is you’ll get better and better and faster and faster as you go. And as long as you’re learning and moving forward, that’s all you need to do. It really is progress over perfection. It is a journey, but you’ve got to start the journey.

Outro: You’ve been listening to Believe in Banking, a podcast series created to empower decision-makers, influencers, and industry leaders in financial services. Be sure to also join us on our flagship site,