Banks Branching Out With a New Look : Some ‘Stores’ Offer an Array of Services Under the Glow of Neon

The bank branch of the 1990s has been evolving through much of the 1980s in Columbus, Ohio, and Seattle.

Consumers who use these branches can choose from an array of financial services that leaves the old checking account and auto loan in the dust.

Take any of Seattle-based Washington Mutual’s 74 branches throughout that state. Before customers can make it to a teller, they must pass areas offering travel services, insurance, pension consulting and full-service securities brokering.

At Banc One’s modernistic new branch in Columbus, financial services are identified by neon lights--like Brokerage Services, Real Estate. The neon is enough to make some bankers wince, but it is difficult to argue with success.

“Customer reaction has been very positive,” said John A. Russell, director of corporate marketing at Banc One. “We keep the facility open seven days a week and in the evenings. Sunday is our second- or third-busiest day.”

If these operations sound more like department stores than banks, they should. The bankers who run them call the branches “stores,” and they have adapted the retail industry’s sales-oriented philosophy to increase volume and lure customers.

Glitzy attention-getters, like vacation posters, are put in the front of the branch to attract customers and lend an air of excitement rarely associated with a visit to the local bank office.

Californians will not find such branches yet because banks in the state have been slow to respond to the new opportunities. But most people in the industry agree that some version of the new branch is on the way everywhere.

Wells Fargo will open the state’s first full-service brokerage owned by a bank in January. However, its offices will be in two central locations rather than in branches, robbing the bank of the advantage of customer traffic.

Some changes may be in the offing because state-regulated banks will soon be able to sell insurance as a result of the passage of Proposition 103.

“The bank branch is going to change--I’ll bet the house on that,” said Thomas A. Cooper, the former president of Bank of America who now heads Invest, a Tampa, Fla., firm that works with banks to update branches and marketing philosophies.

Cooper is one of the strongest voices in the country advocating the need for banks to remake themselves in the face of competition from non-bank financial institutions, such as American Express, Sears and Merrill Lynch.

Experts such as Lowell L. Bryan, author of the recent book “Breaking Up the Bank” and a director of the consulting firm of McKinsey & Co., argue that the industry’s problems are not cyclical but the result of fundamental changes that require rethinking a bank’s role in the financial world.

And that includes the role of the branch.

“If you’re a banker, you have got to see yourself as a financial services manager,” Cooper said in a telephone interview. “You have got to believe that the customer is very intelligent, and you have to recognize that if you don’t provide a rational alternative to other institutions, the marketplace is not going to give you the capital to survive.

“This means you change your people, change your marketing effort, change your advertising, change your branches.”

Most bankers define these changes only in terms of the spread of new powers to the banking industry. The industry and its regulators argue that banks need the ability to underwrite and sell securities or offer insurance to remain profitable and sound in an era of heightened competition from other sectors of the financial business.

However, the transformations at places such as Washington Mutual and Banc One are driven not only by new powers but also by an effort to respond to what executives perceive to be fundamental changes occurring in the banking system.

Cooper sees such new branches as “transitional facilities” along the way to a total overhaul of the way banks market products. But for now, these banking “stores” look pretty revolutionary.

Non-Traditional Services

In 1982, Washington Mutual had all the trappings of a traditional bank--and lost $25 million. Last year, the remade version showed a profit of $40 million and made more loans for single-family homes than any other financial institution in Washington.

Thomas H. Oldfield, the supervisor of banking in Washington state, hailed Washington Mutual in a recent interview as a prime example of how an institution can turn around by combining new powers available to state-chartered banks with new marketing techniques.

Over the past six years, Washington Mutual has acquired a full-service brokerage, an insurance agency, a pension consulting company, a money management company specializing in mutual funds, two life insurance underwriters and a travel agency.

“The whole strategy is that we want to be a broad provider of consumer financial services,” said Kerry K. Killinger, the bank’s president, in a recent interview in Los Angeles.

By providing a range of non-traditional services, the institution hopes to hold on to existing customers and attract new ones. For instance, 75% of the customers who use the bank’s travel agency were not previously Washington Mutual customers--and people who use travel agencies tend to be more affluent than average.

The travel agency’s posters also provide a touch of exotica in branch lobbies. But even Killinger is not prepared to go as far as Banc One. “I’m not sure our customers are ready for neon,” he said.

Banc One’s Russell, however, said customers love the new “financial marketplace” branch in an up-and-coming neighborhood in northwest Columbus.

“It’s designed just like a mini-shopping center,” Russell said in a telephone interview. “When you walk in the front door, it is bright and clean, and you see all the things you would see in an upscale boutique shopping center.”

Just like a department store, in fact, the bank tries to direct customer flow past as wide a variety of products as possible. On the way to a teller at the rear of the branch, customers pass the neon signs for offices offering travel services, insurance, discount brokerage, small business loans, special trust services, mortgages and a real estate office where they can buy or sell a house.

Some of the services are traditional products repackaged. Some of the non-traditional services are bank-owned while others are provided by outside corporations that lease space from Banc One.

In order to keep the branch open seven days a week, the bank hired people from the retail industry, who were accustomed to working weekends, and trained them to be bankers. Russell said that was easier than trying to persuade longtime bank employees to work Saturday and Sunday.

The one-of-a-kind branch, which opened last January, is a model for other branches. Russell said the mix of services and layout will vary from branch to branch in an effort to tailor them to specific locations.

The concept grew out of discussions that began seven or eight years ago at Banc One, a well-regarded regional bank based in Columbus. Executives recognized that new means of electronic banking, such as automated teller machines and banking from home by telephone, would mean that customers were likely to visit bank branches less often.

That would reduce the bank’s opportunities to entice them to buy new products. So the bank decided to redesign its branches to attract customers with other services.

Russell said plans call for installing additional services at about 100 of the bank’s 565 branches. Even Banc One is not abandoning the traditional look of banking at the majority of its branches--at least for now.