The future of banking: In branches or bytes?

John Goerzen rarely steps inside a bank branch. Jeff Geer estimates he goes to the branch only two or three times a year. Both men do nearly all of their banking online.

While area bank executives say there are still a large number of consumers who use branches to do most of their banking business, a shift is occurring in customer preferences.

More of them are using online banking services.

It's a trend that likely won't reverse as bank technology evolves to allow customers to do more of their banking through a PC or smartphone.

It doesn't mean an end for branch banking, bankers said. But the trend could change how customers use branches and how accessible banks make them.

An August survey by the American Bankers Association illustrates the trend. The group asked 1,000 consumers in the U.S. which banking method they used most often.

Of the three choices, 32 percent said online banking, 28 percent said branches and 22 percent said ATMs. Compared to the same survey in 2008, the number of people who chose online banking increased while those who said branches or ATMs decreased.

According to eCom Advisors, an online banking consulting firm, branch transactions were down more than a third in the past four years.

Geer, of Wichita, said he's been doing most of his banking online for five years. If it weren't for having to make an occasional deposit of paper checks or cash, he'd probably go to his bank's branch even less often.

"The beauty about online is it's extremely safe and it allows me to do banking whenever I have the opportunity to do it," Geer said.

Goerzen, who lives near Goessel, said he's done online banking with an online-only bank for a decade because of the convenience.

"It's worked out really well for me and was especially handy when we moved from Indiana to Kansas," he said.

The statistics, or even Geer or Goerzen, aren't enough to convince some bank executives that branches will become extinct.

"It isn't going to be in my lifetime and probably not yours, either," said Tom Page, Emprise Bank chief executive.

Page said when ATMs were introduced in the 1980s, there was a lot of speculation in the industry that they would mean the end to human tellers.

"Well, that hasn't happened," he said, but added there are fewer tellers working in bank branches nowadays

Branches still used

Lyndon Wells, executive vice president of Intrust Bank, said his bank is seeing a shift because of the advent and expansion of online banking.

"In absolute numbers we're probably getting closer to more customers using electronic delivery channels than... the branch channel," Wells said.

But like Page, Wells said that there are still many customers who use only branches to conduct their banking business. It's typically a difference in generations.

"For my mother, visiting the branch is a social experience for her, and she's happy to have that interaction," Wells said. "My children, on the other hand, they transact all their business online or through ATMs and the personal interaction is not as important to them. We invent new ways for the customer to communicate with us, but we still have to honor the old ways."

Wells said Intrust evaluates new branch projects more thoughtfully than it did in the past.

Kenneth Friedel, a bank consultant with Kennedy and Coe, said he thinks the growth of online and mobile banking could slow new branch building.

"I think we're definitely going to see a retraction in them being built or expanded," he said.

But branches are still an important marketing tool for banks, beyond delivering products and services.

"Branches are a manifestation of banks being part of a community," Friedel said.

Branches are a costly delivery channel, however, in terms of building upkeep and staffing.

"In this age of banking, where fees are expected to decrease, loan losses are expected to remain a difficult challenge and interest margins are being squeezed, the cost of overhead like a branch has to be closely scrutinized," he said.

Branch closings are rare but not unusual.

Last year, Bank of America closed some of its 6,100 branches across the country, including one in Wichita at 501 N. Woodlawn, which is now a branch of Credit Union of America.

Emprise's Page said if he could start all over, his bank would have fewer than the 41 branches it has now.

"But nobody gets that chance to start all over," he said.

Page said he thinks there are too many branches in Kansas but in order to compete banks have to keep what they already have.

Intrust's Wells said there could come a point when bank customers could have to pay to use branches.

"Most of us (in Kansas) have not priced a la carte for services," Wells said. "What we may see as we go forward is more specific charges or account structures depending upon the way the customer chooses to use the financial institution."

The key to all of this will be finding the balance.

The reality, Wells, Page and Friedel said, is a lot of customers use all of a bank's delivery channels at some point.

"The trend is we want it all (as consumers)," Friedel said.

Wells said the speculation over when — and if — branches go away will remain for some time to come.

"This is a continuing story that's been going on for the last 30 years in our business," Wells said.