In what will surely be the first in a long string of similar headlines, the top of  yesterday's Wall Street Journal Money & Investing section declared:

BofA Plans to Cut 10% of Branches

The article, which has been picked up by nearly 100 news sites in the past 24 hours, reported that Bank of America was planning on reducing the size of its 6,000-branch network. There were no details on timing or whether the bank was retreating from certain markets or was simply pruning overlapping branches broadly.

But in later interviews with bank execs, it sounded like Bank of America was merely predicting a gradual shrinkage in its branch network over the next three years, and had no firm plans for specific closures. Here's a followup quote from president Liam McGee as reported by Charlotte NPR station WFAE:

"I think <CEO Lewis> was asked a question, 'Boy, could there be x-percentage less branches in the next few years?' And he was just saying, 'Yeah, could be, and if there was it would be in magnitude of this as opposed to a much higher number.'"

McGee says the bank is going through a 3-year evaluation process that could result in fewer branches, but that no particular number is targeted. He says customers' changing habits are driving the process.

What I found more interesting in the debate were some of the numbers the bank tossed out showing the growth of it's non-branch delivery:

• Nearly 50% of deposits are made in ATMs...up amazingly from 33% six months ago. The bank didn't say whether this was NUMBER of deposits or VALUE of deposits, but it's likely the former. Also, it's unclear if remote deposits made via scanner are included in the total. That new technology is making a significant dent in branch-based deposits at many financial institutions.
• 2.8 million customers are now using the mobile channel which was introduced in mid-2007. That's an average of about 120,000 new customer per month. However, growth appears to have accelerated slightly this year. In early Feb, the bank said it had 2 million mobile banking customers; so in the past 5.5 month, growth has been just under 150,000 new users per month.   
• The bank has a 60% market share in online bill payment; an amazing penetration for a bank with 12% of the country's deposits. 

Note:
1. See our Online Banking Report: The Demise of the Branch (April 2006), for more on the long-term trends in the mix of branch and alternative delivery.

I've gradually come around to Twitter as both a communications and research tool. A year ago it could have been dismissed as a niche platform for a few hundred thousand hyper-social geeks. But now that adoption has tipped, with 14 million users last month (see chart), the power of the network is opening up new opportunities.

My favorite: Tweeting bakeries (note 1). A British company, Poke, has developed a little box that sits behind the counter at a bakery.  Whenever a new batch of rolls or pastries is ready to serve, the baker turns a dial to the specific item and presses a button. That automatically sends a pre-programmed Tweet to the bakery's followers. It's called, appropriately, BakerTweet.

Bank opportunities: Unless you merge operations with a bakery (maybe not such a bad idea), financial institutions have nothing nearly as exciting to Twitter about. However, there are useful items a branch could broadcast to its followers:

• When the drive-thru lane was empty (or vice versa)
• When branch queues have disappeared (or vice versa)
• When platform officers are available
• When specific specialists are available in the branch (e.g., home loan officer, small business banker, investment specialist)
• When certain popular employees are working (could be tweeted to just the followers of that person)
• Branch special offers
• Local community events and specials

And if you really want to gain some global recognition, enable payments for the baked goods via Twitter (see TwitPay). For example, users could respond back to the bakery's tweet with:

@bakerytweet hold 2 chocolates pay $2.45 via @twitbank

Assuming users were registered at BakeryTweet and Twitbank, that's all it would take to order and pay for two warm rolls (note 2).

Notes:
1. Kudos to Springwise for finding this idea here. 
2. Yes, there are fraud, privacy and reliability issues to work through, but as long as purchases are kept under a certain floor, the exposure would be minimal. 
3. See also the Harvard Business article last week (9 April 2009) by John Sviokla, Twitter: A Marketer's Duct Tape.

Salt Lake City's Beehive Credit Union is launching eight microsites, one for each of its eight branches. The sites are based on a blogging template and are nearly identical.

As you can see in the screenshot below, the only differences are:

• Branch name and photo across the top
• Branch name inserted into various headlines and copy throughout the site
• Contact Us page lists only the specific branch

URLs are based on the main site, with the branch/city name in place of the "www":

• Murray >>> murray.beehivecredit.com
• Parley’s Way >>> parleysway.beehivecredit.com
• Provo >>> provo.beehivecredit.com
• Salt Lake City >>> saltlakecity.beehivecredit.com
• Sandy >>> sandy.beehivecredit.com
• South Jordan >>> southjordan.beehivecredit.com
• St. George >>> stgeorge.beehivecredit.com
• Taylorsville >>> taylorsville.beehivecredit.com

What it means
The Beehive sites illustrate two trends: 

• Developing a full Web presence from a blogging template
• Creating custom websites for geographic areas or individual branches

While I like what Beehive is doing, I hope they take it to the next level and create a more customized experience by letting branch employees add content themselves or at least control some aspects of the microsites.

The CU is working with Listpipe for content creation. Thanks to Jeffry Pilcher for the find.

Beehive South Jordon site (1 July 2008)

Beehive Taylorsville site (1 July 2008)

Ron Shevlin, the Forrester alum who blogs at Marketing ROI and occasionally at NetBanker (posts here), has been on a roll recently with a number of thought-provoking posts that take on the conventional wisdom we hear in meetings, press releases, and other soundbites picked up by the press.

Earlier this month, Ron challenged some of the statements made in the press implying that the downfall of NetBank was caused by its online delivery strategies (here). That initial post led to an interesting discussion culminating in this gem (here) where he takes on the whole notion that banks MUST have branches to acquire new accounts, concluding (words in parenthesis are my additions to show context):

"The inability of the Internet to supplant the branch as the acquisition channel of choice (so far) has very little to do with the inherent superiority of the branch, and everything to do with the (current) inferiority of the online channel." 

And my favorite, this zinger:

In effect, bank branches are just big, expensive security blankets.

Inspired by his post, I've come up with what I'll call the "5 Habits of Inefficient Delivery" (see note 1). 

Habit #1: Customers go to branches to solve service problems.

Expensive solution: Build more multi-million dollar branches to house expensive service reps to sooth frustrated customers. 

Better solutions: (A) Improve the product/service so there are fewer problems; (B) Solve customer problems online in near real-time, not "within 24 to 48 hours"; (C) Empower online support reps to solve problems without forcing the customer to make an hour-long trek to a branch.

Habit #2: Customers go to branches to apply for new accounts.

Expensive solution: Build more multi-million dollar branches and staff them with well-compensated sales agents to transcribe applications hand-delivered by customers.

Better solutions: (A) Develop a killer online sales process that helps customers choose the right option; (B) Provide a user-friendly application with 24/7 online support and solid guarantees. 

Habit #3: Customers feel more comfortable with a bank that has a large branch presence.

Expensive solution: Build more multi-million dollar branches or what Ron calls, "big, expensive security blankets."

Better solutions: (A) Trust your customers and treat them right at every opportunity, and they'll remain loyal no matter how many branches you operate; (B) Keep prices competitive, i.e., no more 10 basis points of interest for a savings account (see here). 

Habit #4: Customers like to use the branch to deposit paper checks.

Expensive solution: Build more multimillion-dollar branches that serve as human-powered ATMs.

Better solution: Until paper checks disappear, use remote-deposit capture, envelope-free (image) ATMs, and instant credit for mailed deposits such as Pennsylvania School Employees Credit Union's (PSECU) Upost@Home (previous coverage here) (see note 2).

Habit #5: Customers go to branches because they are there.

Expensive solution: Build more multimillion-dollar branches to stay within a few minutes' drive or walk for most of your customers

Better solution: Make the online and telephone customer experience so phenomenal and complete that no one misses the branches as they close and consolidate

Notes:

1. For more information, see Online Banking Report, "The Demise of the Branch"

2. On a related note, see PSECU's "Go Branchless" campaign (here)

Well, not so much when compared with other Western countries; however, the bigger question is whether they are all overbranched. Only Singapore, with 111 branches per million inhabitants, is in a good position cost-wise. Italy and Switzerland, with more than 700 branches per million, have their work cut out for them as they reduce the number of branches from a level twice as high per capita as the U.S. total of 372 per million.

At our sister publication Online Banking Report, we've predicted that the total number of branches in the United States will fall by about 40% during the next 20 years (see note 1). Given expected population growth, that equates to about half the number of branches per million (using the BIS baseline, our projection is that the U.S. would have fewer than 200 branches per million in 2025).  The reason for the decline is the rise of the out-of-branch channels: phone, online, ATM, and soon mobile (see note 2).

Here's some interesting data from the Bank for International Settlements <bis.org>. Click on the table below to read the five-year data trend. The 270-page PDF is located here.

Interestingly, of the 13 countries covered in the report, only Hong Kong, Singapore, Sweden and The Netherlands have fewer branches per capita than the United States. We have almost 25% less than the 13-country average. Only two countries showed an increase in the 2001-2005 period: Italy which added 1,500 branches and the United States which grew about 6,000 (see note 2).

Here's the list in order of most branches to fewest per million inhabitants:

1. Italy                 >>> 762
2. Switzerland   >>> 701
3. France            >>> 649
4. Belgium          >>> 566
5. Germany        >>> 561
6. UK                     >>> 472
<< <AVERAGE >>> 471
7. Japan               >>> 459
8. Canada             >>> 441
9. U.S.                    >>> 372
10. Sweden          >>> 295
11. Netherlands >>> 270
12. Hong Kong   >>> 249
13. Singapore     >>>  111

Notes:

1. See Online Banking Report's Decline of the Branch (#128), published May 2006.

2. Tom Brown's been writing about the trouble some banking chains have been having with the performance of their new de novo branches (see here).  

3. In 2001 and 2002, the U.S. branch total in the BIS data-set excluded credit unions.