Branches Evolve, Remain Relevant With Rise Of Online Banking – BizWest

With the growing popularity of online and mobile banking – a trend accelerated by the COVID-19 pandemic – it’s fair to wonder about the future of the physical bank branch.

But even with the rise of online banking, the branch remains a key feature of the industry. In fact, at least half a dozen new branches have opened in the Boulder Valley and northern Colorado in the past year.

So how do bank managers decide where to locate their branches?

“It really is more art than science,” said Bank of Colorado Chairman Shawn Osthoff.

For retail-focused banks, customer convenience is paramount, he said – “good access in and out with good visibility”.

Site selection for consumer banks is “determined by demographics and number of traffics,” said Skye Commercial Real Estate Inc. chief broker Geoffrey Keys.

Growth potential is another important consideration.

“Will the market grow? Are there traffic lanes that will continue to be threaded? Osthoff said.

He cited the Bank of Colorado branch in the 2534 Johnstown development, which opened about a decade and a half ago, as an example of the proper site selection process.

“We were one of the first buildings there,” Osthoff said. “We might even have been a bit ahead of our time,” opening before much of the existing development had been completed.

“But it’s a great place for us in terms of brand awareness, visibility and accessibility,” he said. “It’s kind of a billboard.”

For commercial banks, the site selection calculation is a little different.

“We don’t think about branch site selection like many national banks do which are more retail-focused and have to think about driving traffic to their branches,” said InBank Chairman Ed Francis. .

“With a commercial client, 95% of the time we go see him, he doesn’t come here to see us,” he says. “…We think more about the inflows and outflows of our bankers and their ability to reach their customers.”

Whether their customers are newlyweds opening a joint savings account or a restaurant chain seeking financing to open a new ramen shop, longevity is key for the banking industry section of the site.

“There is a lot of infrastructure needed to set up a branch in terms of security, vaults, vaults. There is a big upfront cost to establishing a branch,” Keys said. “…When we look for a branch, we generally look for a lease of at least 10 years. They will usually stay in their space much longer than that.

Due to expense and the desire to stay in place for an extended period, some banks are focusing their expansion efforts on real estate they can own rather than renting.

“When you build bank branches and beautiful offices, it is quite expensive. So we try to think of places where we can own. If we can’t own them, then we’re thinking of places with long-term rental options,” Francis said. “Once you’ve established a location, it doesn’t make much sense to move it every year.”

In general, Francis said he adheres to the “philosophy that we want to be in big markets with lots of growth where you can gain market share or we want to be a dominant player in smaller markets.”

West Greeley is a ripe market for Bank of Colorado expansion.

“The town of Greeley continues to grow westward, and we wanted to be in the middle of the growth trajectory,” Osthoff said of the decision to place a branch on West 20th Street.

“Essentially we are looking to new growth markets that haven’t been served by banks, so we’re ahead of the game to get there,” he said.

While bankers are quick to defend the importance of the branch, they recognize that the industry has changed.

“The size of these branches has changed significantly,” Osthoff said. “The days of a 10,000 square foot branch are behind us. Most locations we consider are over 3,000 to 4,000 square feet at most and sometimes less than that.

Francis said he doesn’t “think bank branches are going to go away. I think there will always be clients who need to see bankers and interact on a personal basis. But the industry is changing, and fintech companies are a big part of that. We must therefore evolve and serve customers as they want to be served.