Banks step out from behind the glass

Online banking has fans, but many customers still want to visit a local branch - and find people. Enter 'retail banking.'

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Kevin Caires is tired of being put on hold. Like most people with delicate questions about their bank accounts, he wants a quick and clear answer - from a human being.

It's a simple request. But in an era when banks nudge their customers to ATMs, the Internet, and the telephone to perform basic transactions, a plea for customer service of the human variety can seem like a petty indulgence.

"I'm looking for a bit more of a personalized feel," says Mr. Caires of Boston. "I could hardly speak with anyone at the big bank I was with before."

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In the past five years, banks have turned to technology in an effort to downsize staff and shave costs. Some exist only online. At many bricks-and-mortar outlets, customers aren't greeted in the lobby by an employee, but with a sign directing them to the ATM.

And much of the information once reverently presented in sit-down chats with new customers is now posted online.

But the new regimen of cyberservice could be waning, experts suggest, as disaffected account holders like Caires grow impatient for some old-fashioned customer service.

In response, banks new and old are reinventing themselves, applying a Wal-Mart look to the face of an industry long symbolized by its imposing marble columns and employees behind plexiglass or bars.

"When Internet banking started a few years ago, everyone was saying 'more automation, less human interaction,' " says Avivah Litan, an industry analyst with Gartner Group in Stamford, Conn. "Now [bankers] have learned that their bread and butter is more human interaction."

The people-friendly approach of one of Boston's newest branches prompted Caires to switch his account. Directbanking.com, a dual online and bricks-and-mortar bank, recently opened a branch in the city's Financial District just blocks from the neck-craning headquarters of banking behemoth FleetBoston.

The fledgling branch's lobby is plastered with a telling message: "Welcome to the world's most advanced branch." Even more indicative of the bank's iconoclasm: Its walls are bright yellow and blue, and a big-screen TV broadcasts financial news in the lobby.

While the bank still promotes transactions through electronic kiosks, the key attraction of this once exclusively online outfit is its concessions to customers' creature comforts. People are greeted at the door. Employees sit behind a few desks, not bars. And spacious customer conference rooms line the hallways.

"Banks are 10 years behind in their retail philosophy," says branch manager Edward Nunes. "Because they don't have an actual physical product, the employees tend to hide behind their desks. That's why I came here."

Mr. Nunes' experiment has reaped impressive results. In its first three months, the branch's accounts have exceeded expectations with more than $13 million in deposits. One new customer, Cotton Chou, only joined the bank after its switch to "clicks-and-bricks."

"I don't trust the security of the Internet," says Mr. Chou, a Boston native with a nearby office. "It's just nicer having a place you can go, and people to speak with."

That seemingly widespread sentiment has spurred other financial outfits to join the movement toward "retail banking." Seattle-based Washington Mutual, the nation's largest thrift, is in the vanguard. After studying the electronic banking experiment for two years, it refashioned a number of branches using a new format they call the "unbank," likening them to coffeehouses.

"Through the past few years, customers told us the branch was still the place where they made significant decisions about their money," says Deanna Oppenheimer, president of consumer banking at Washington Mutual. "You can't force consumers to do what they don't want to do."

The bank's newest branches are models of reform. They are open and casual. Employees don khakis, not pinstripes, and roam the floor with hand-held computers to access quick information. One employee even acts as an escort to help usher customers to the correct area of the "store" - including a playroom for kids.

The new design, more common to a video store than a financial institution, seems to have touched a chord. Twenty branches in Las Vegas - where the bank first introduced the new format - have drawn twice the number of checking accounts and tripled average annual dollar deposits.

Washington Mutual plans to build 40 similar "stores" in Phoenix this year and test the format in more branches across the country.

Though technology plays an important role in the new design, Ms. Oppenheimer says it only serves as a complement to a full fleet of active personnel.

"Lots of people had their branch of the future with a piece of whiz-bang technology that tried to take people out of the branch," says Oppenheimer. "We're trying to make technology more human, not humans more technological."

This mini-backlash against tech-based banking has Internet-only outfits reshaping their services. More than 10 percent of American households bank online. And that number is expected to double in four to five years.

But among these early adopters, only 4 percent handle their finances exclusively through the Web. According to a survey by Gomez Advisors in Lincoln, Mass., the vast majority of users tend to access the Internet service offered by their primary, local bank.

People who use Internet-only banks are usually young, well educated, and Web savvy. Many hold an online brokerage account. To reach out to the average bank customer, however, Internet-only outfits are now moving onto Main Street.

Online brokerage and bank E*Trade, for example, purchased the third-largest ATM network in the nation and will soon open its first physical branch in downtown Manhattan, partly in an effort to bring in foot traffic.

Gomez banking analyst Paul Jamieson predicts the Internet will draw more accounts as Web users grow accustomed to spending money online. For now, however, they'll keep turning to a local branch.

"Internet banking is doing great, but it is not the single-channel experience that people use," says Mr. Jamieson. "They like ... the piece of mind it brings them if there's someone there to help access funds."

(c) Copyright 2001. The Christian Science Publishing Society

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