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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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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.

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"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