High-tech replaces tellers as banks see shifting demand

If more banks follow Bank of America Corp.”™s lead, the “A” in ATM might just become a thing of the past.

After closing nearly 200 of its branches from June 2011 to June 2012 ”” more than any other bank in the country during that period ”” the Charlotte juggernaut on April 4 unveiled a next-generation automated teller machine that allows customers to video chat with an actual bank teller.

The banking industry is at a crossroads as interactive ATMs, mobile deposits and other technologies threaten to supplant tellers and branches.

The issue is compounded by the growing number of banks and branches in the region. While reports show there are fewer bank branches nationally than prior to the 2008 financial crisis, the opposite is true of Fairfield County.

Thirty-two commercial banks and savings institutions had a combined 409 branches in Fairfield County as of June 30, 2012, according to Federal Deposit Insurance Corp. (FDIC) data.

That represents a 4 percent bump from June 2007, when 32 institutions had 392 Fairfield County offices, according to a Business Journal analysis.

Reyno A. Giallongo, chairman and CEO of First County Bank, said the Fairfield County banking market is “absolutely” oversaturated.

“You could probably open up the Darien phone book and there would be 25 branches of 15 different banks just in the town of Darien,” Giallongo said. “I couldn”™t even tell you how many banks there are in Stamford … Everybody”™s here, so it”™s such a good market for banking, but it”™s a mature market.”

First County, based in Stamford, has 15 branches in Fairfield County ”” up from 14 branches in 2007. “We like our branch system a lot, we like brick and mortar a lot,” Giallongo said.

However, he said, First County and others are in the midst of a “rightsizing.”

“Transaction counts are decreasing in the branches,” Giallongo said. “So the bank branches themselves are ”” I hate to use the term rightsized ”” but they”™re being rightsized for the combination of technology and selling activity going on in the branches these days.”

Giallongo said First County”™s branches are being restructured to be more customer service- and selling-oriented, saying, for example, “If you walk into one of our branches as a customer and you have a checking account, someone should chat with you about what”™s going on in your personal life and talk with you about the need for life insurance.”

Judd Caplain, a national leader of banking and diversified financials in KPMG L.L.P.”™s advisory services unit, said the shift described by Giallongo is occurring nationwide.

“If anything, the banks would like to use their branches more as a store, or sales channel, rather than for processing transactions,” Caplain said.

Strategic shift

Regulations such as the Durbin Amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act, which caps the fees that banks can collect on debit card transactions, have cost banks billions of dollars in lost revenues, Caplain said.

“Since the financial crisis, banks have seen a decline in their top-line revenue,” he said. “Revenues are just not growing, and if they”™re growing, it”™s very modest growth.”

Webster Bank, based in Waterbury, is among the region”™s banks that have taken steps to reverse that trend of falling revenues.

In his March 15 letter to shareholders, James C. Smith, chairman and CEO of Webster Financial Corp. and banking subsidiary Webster Bank, wrote, “Strategic investments in electronic banking, infrastructure and relationship businesses are producing higher revenues, operating leverage and improving returns.”

Over the past two years, Webster has consolidated its branch network by about 10 percent, Smith wrote.

Last year, Webster accelerated the installation of 251 deposit automated, image-capture, touchscreen ATMs. Deposits at the upgraded ATMs are up more than 40 percent, Smith wrote, while branch deposit transactions fell 8 percent over the same period.

“By enabling customers to shift routine transactions to ATMs and eBanking, we are freeing our branch bankers increasingly to provide financial advice rather than transaction assistance,” Smith wrote.

After introducing a “Universal Banker” program and certifying all branch managers as business bankers, Webster”™s business loan volume grew by 44 percent in 2012.

At First Niagara Bank, which is based in Buffalo and which recently entered the Fairfield County market through the separate acquisitions of 14 NewAlliance Bank and HSBC Bank USA branches, mobile banking is among the fastest-growing services.

“For our franchise here in New England, lower Fairfield is an extremely important market for us. … Fourteen branches strong is a great place for us to be,” said Marlene Piche, First Niagara”™s retail banking director for the New England region. But, she said, “Mobile banking is a reality.”

Since First Niagara launched its mobile banking application for smartphones in January, 78,000 customers have downloaded it, representing 20 percent of the bank”™s customers who use online banking.

”˜Eye-popping”™ closures

U.S. banks and thrifts closed an estimated 2,200 branches in 2012, a statistic Lindsey R. Pinkham, president and CEO of the Connecticut Bankers Association, called “eye-popping.”

“The role of the branch will be changing, has been changing over the last few years. One of our institutions that I”™m aware of actually has a teller-less branch,” Pinkham said, with tellers located at the main office and able to speak with customers remotely. “How much that takes hold, I don”™t know, but obviously the technology is here to do that.”

The closures, however, have yet to reach Fairfield County.

With the exception of mergers and branch acquisitions ”” such as First Niagara Financial Group”™s recent acquisitions ”” the county”™s institutions and their branch counts were mostly unchanged from June 2007 to June 2012, according to FDIC data.

Other changes include Washington Mutual Bank”™s 2008 collapse and the subsequent sale of its assets to JPMorgan Chase Bank, Wells Fargo Bank”™s acquisition of Wachovia Bank and TD Bank”™s acquisition of Commerce Bank.

In June 2007, 20 commercial banks and 12 savings institutions had branches in Fairfield County; last year, there were 22 commercial banks and 10 savings institutions with branches.

People”™s United Bank, Bank of America and JPMorgan Chase Bank ”” the county”™s three biggest banks by branch count in 2007 ”” have maintained their positions as the top three banks in Fairfield County by branches.

 

[Clarification: The 78,000 First Niagara Bank customers who have downloaded the bank’s mobile application represent 20 percent of the bank’s customers who use online banking. A previous version had stated that the figure represented 20 percent of all First Niagara customers.]