With the growing popularity of Internet banking and ATMs, banks are getting fewer chances to meet with customers face to face. Providence-based Citizens Financial Group Inc. is fighting the issue by expanding its network of branches in retail locations.
“A lot of banks got out of [retail stores] because they didn’t treat it as a customer-acquisition model,” said Hal Tovin, group executive vice president of Citizens Financial Group, the parent of Citizens Bank. Other banks, he said, did not aggressively market to shoppers, so their new branches just ended up serving existing customers and increasing their expenses.
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But Citizens has been opening or acquiring in-store branches as competitors have abandoned the strategy. And now, the $164 billion bank has 514 in-store branches, second only to Wells Fargo with 630, according to NCBS, a Memphis-based in-store branch consultancy.
The list of stores and supermarkets in which Citizens operates branches includes major retailers such as Wal-Mart Corp., Stop & Shop Supermarket Co. and Shaw’s Supermarkets Inc. Also, the bank has recently put several branches next to Starbucks Coffee shops.
Citizens became No. 2 on the in-store branch list early this year, with an agreement with Stop & Shop to add 75 new branches in the supermarket chain’s outlets in New York state, in places such as the Hudson Valley, Long Island and New York City. By the end of the year, the bank says it plans to have 535 in-store branches throughout the Northeast, Mid-Atlantic and Midwest regions.
Why? Operating in stores and supermarkets puts the bank in front of tens of thousands of potential customers. “Even in a state like Rhode Island, where we have very high market share, half the people walking by are not your customers,” Tovin noted. “So [the in-store branch] puts you in a constant flow of prospects.”
Tovin said Citizens’ in-store branches typically generate 30 percent more new checking accounts than its freestanding banking houses. Yet to succeed in retail environments, he said, the bank has had to alter its traditional business model.
For one thing, the bank has recruited employees with experience in retail rather than banking to staff the branches. People with retail backgrounds, Tovin said, are generally better at interacting with shoppers and are more accustomed to the longer hours at in-store branches.
Dave Martin of NCBS agreed. The company’s executive vice president and chief training officer, he consults with banks on how to operate in-store branches. “When part of your DNA tells you that not everybody that walks into the store wants to do business with you,” he said, you are more apt to approach shoppers and convert them into bank customers.
Conversely, Martin said, people who walk into a traditional bank branch most often want to do business with the bank, and that puts less pressure on employees to sell services. Yet, he said, banks that have taken that traditional approach at in-store branches have suffered from high turnover, among employees unable to adapt to the pressures of selling to the general public.
The focus of the in-store branches varies by bank, Martin said. Although Citizens’ in-store branches are a key part of the bank’s customer-acquisition model, he said, other banks, particularly in the South, have been successful at using in-store branches to gain lending business and investments from customers.
“I think banks would like in-store branches to be more sales centers, but when it comes right down to it, they are more transaction centers,” said Karen Massey, a senior analyst at Financial Insights, a financial-services research firm based in Framingham, Mass.
“I think consumers are uncomfortable, in the supermarket setting, sitting down with an adviser and going over their personal information,” Massey added.
Citizen’s Tovin said his bank also has grappled with the challenge of making customers feel comfortable at in-store branches. The bank has responded to the problem with a new layout for its in-store branches that provides more private quarters for customers to do their banking.
In-store branches can do more than bring new customers in to the bank, say people familiar with the business. By spending more face-to-face time with those customers who use in-store branches, the bank can boost fee income from service charges and the like.
But the key to Citizens’ success with the branch offices remains the opportunity they present.
“Setting up a beachhead in these high-traffic stores gives you an opportunity to tap a huge customer base,” said NCBS’ Martin.
