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Banks find they must branch out

Withdrawals and deposits aren’t attracting customers to brick-and-mortar offices anymore, so banks are turning to perks like coffee bars and yoga to keep an important gateway open

Capital One runs a cafe-style office in San Francisco. Employees serve up coffee and advice.Jan Sturmann for the Boston Globe

Hip, modern, and fun. That may fit the description of a new nightclub or restaurant, but what about the corner bank branch?

That’s exactly the vibe many of the nation’s banks are trying to achieve as they reimagine their branches and try to lure more customers into brick-and-mortar offices.

At one West Coast bank, you can spread your yoga mat and strike a tree pose or grab a free beer during an Oktoberfest-style celebration. Another national bank offers macchiato at its coffee bar and couches designed for lounging. Locally, banks are adopting Apple Store-like designs, adding concierges, and setting aside space for community groups to meet.


The goal is to stop the steep decline in foot traffic at banks, where today only about one-third of customers routinely use branches, according to one study by global business consulting firm AlixPartners. But in an era when more financial services are conducted electronically, whether online, at ATMs, or through mobile devices, why bother?

The answer, of course: profits. In an era of low interest rates and high costs, branches remain an important gateway for moving customers into more profitable services such as wealth management, personal banking, and loans of all types.

Bank of America, for example, recently launched what it calls a flagship office in Boston’s Back Bay, housing in one place the variety of financial services offered by the banking giant. Teller services are squeezed behind a column, while private offices where more lucrative business is conducted dominate the floor space.

Bank representatives walk around in neatly pressed suits carrying computer tablets to pull up customer accounts on the spot and schedule appointments with small business bankers, mortgage loan officers, and financial advisers. A greeter directs people to either a teller line for simple transactions or upstairs to the wood-paneled offices of the bank’s investment and financial advisory unit, Merrill Lynch, where more affluent clients get personal service.


Dave Baird-Miller, a Bank of America staffer in the Back Bay, carries a tablet computer so he can help customers.David L. Ryan/Globe Staff

The flagship branch is designed to maximize the opportunities for the bank to cross-sell — that is pushing existing customers into additional products and service. Having all of the bank’s products in one location is key to doing that, Bank of America officials said.

“What we are doing here is redefining what we’re doing in the banking center,” said Dean Athanasia, Bank of America’s preferred and small business banking executive, of the flagship branch.

Overall, banks have cut branch networks in recent years as customers reduced their transactions there. Bank of America, based in Charlotte, N.C., for example, has closed more than 1,200 branches nationwide. AlixPartners projects that banks overall will cut another 20 percent of their branches by the end of the decade.

Still, branches remain crucial to the industry and customers, although their role is changing, said Bob Hedges, a managing director with AlixPartners, which is based in Michigan. They help to increase awareness of the brand, like flying a flag, and still serve as marketing centers.

Customers also like to visit branches for more complex financial needs, such as home and auto loans or advice about how to save for college and retirement, Hedges said

Changing customer behavior, driven by the migration to online and mobile banking, is prompting banks to redesign their branches. Eastern Bank, based in Boston, is opening a new branch on Cape Cod that looks more like an Apple Store than a bank, with plenty of white fixtures, curved surfaces, and light wood.


At 2,500 square feet, the space is half the size of a traditional branch. Straight-edged teller counters and stacks of brochures have been replaced with a semicircular console and touchscreen monitors. If customers need talk to financial specialists in Boston, they can do it by video conference.

The technology means Eastern can provide services with fewer people assigned to the branch,  while the design encourages employees to walk the floor, chatting up customers and promoting different products, as in a retail environment.

Joe Riley, executive vice president at Eastern Bank, noted that when he started his career in the 1980s almost all customer transactions were completed at the branch. Now, just half of the business is done at the branch. “It’s pretty clear that we need to respond,” Riley said.

In general, banking analysts said, the branch of the future will be smaller. What was once the main attraction — the teller station — will shrink into corners. Universal bankers who perform multiple roles, from opening accounts to cashing checks to selling the bank’s loan services, will largely replace tellers.

And to attract customers who might not really need to visit a branch, banks will also have to fashion the office as a destination.

Capital One Financial Corp., well known for its credit cards, is breaking into the Boston banking market with six new marketing offices called “cafes.” Scheduled to open over the next several months, they will resemble coffee shops more than banks. Employees will serve up java and sandwiches, along with advice on how to set up online accounts and access other services.


Capital One also will host financial literacy and other seminars at the cafes, as well as allowing local groups to hold meetings there. “We see our cafes serving as community hubs,” said spokeswoman Laura DiLello.

Umpqua Bank of Portland, Ore., also lets community groups use its branch space. Its branches have hosted yoga classes, dog fairs, and an Oktoberfest event, complete with beer, pretzels, and a roving accordion player.

Opening up the branch for community events not only attracts new customers, but could also help banks make use of all the extra space they have, said Dean Nicolacakis, a co-leader of consulting firm PricewaterhouseCoopers’ North American banking practice.

As the bank branch evolves, customers in urban areas, which are quicker to adopt new technologies, will likely see the changes first, Nicolacakis said. Expect to see more self-service kiosks, flagship stores, and community centers.

In rural areas, meanwhile, branches might become hubs for a host of virtual services, using remote technology to connect customers to loan officers, investment advisers, and other services.

Whether the branch of the future will look more like Apple Stores, coffee shops, financial advisory firms, or yoga studios remains unclear. But, analysts said, expect banks to keep experimenting as they try to find the right mix of services, atmosphere, and pizzazz to keep customers coming in.


“I don’t think the industry, generally speaking, knows what the right answer is,” Eastern Bank’s Riley said.

Deirdre Fernandes can be reached at deirdre.fernandes@globe.com. Follow her on Twitter @fernandesglobe.