Building the Future

Banks respond to changing customer service needs

By Andy Meek

The CEO of the largest bank based in Memphis told analysts earlier this year on the company’s first-quarter earnings call that executives there are in the middle of rethinking the bank’s branch network.

First Tennessee Bank branch manager Kirsten Mings (center) and employees Cal Overman and Chandra Jackson assist customer Mohammad Alrawahneh with a transaction. First Tennessee and other banks are rethinking the branch network strategy as more customers go mobile.

(Daily News/Andrew J. Breig)

That executive was Bryan Jordan, CEO of First Tennessee Bank parent company First Horizon National Corp. He told analysts the bank is taking a fresh look at the number of bank branches needed across the company’s footprint as well as the size of those locations “as we determine the right delivery channel mix to best serve our customers.”

Not only that, but First Tennessee is in the midst of upgrading existing branches through a combination of investments in technology and staff. And it has introduced a new branch prototype that brings a fresh approach to the in-person banking experience.

On the surface, such moves are understandable. When rates are universally low and banks can’t offer much to lure in customers who might want products like a CD or savings account, they have to compete by using what options they do have.

One thing they have control over is the customer experience itself. If banks – and there are a few dozen based in Memphis, not counting national institutions like Bank of America and SunTrust – generally offer the same mix of products and services, how a customer feels about the entirety of a banking experience is one differentiating factor.

Branches, naturally, are a big part of the experience. But increasingly, customers are choosing to do most of their business online and on mobile devices. If they do visit a branch at all, it may be via a drive-thru lane where they interact with a teller behind a window – or, if they’re only making after-hours deposits and visiting the ATM, there may be no need to interact with a bank employee at all.

“The whole thing is you need to be closer to your customers,” said Triumph Bank CEO Will Chase. “And how do you do that in a world that’s changing?”

That’s the question. No surprise, then, bankers and financial services industry professionals in Memphis have a range of distinct thoughts about the “bank of the future” – specifically, what branches in the future are liable to look like and what they’ll need to look like for an institution to meet its needs and stay competitive.

“Two of the highest non-interest costs for banks are premises and personnel,” said Otto Thomas, a director in the Memphis office of Corporate Finance Associates. “Consequently, in times of pressure on profitability, banks will look at ways of reducing bricks and mortar costs as well as personnel costs. With today's technology and emerging technology, many routine banking transactions can be handled online, eliminating the need to visit a bank branch. In fact, an outside director of a local bank mentioned to me some months ago that his college-age and adult children do all of their banking online and, to his knowledge, have never been in a physical banking location.”

To that end, First State Bank demonstrably recognizes the trend. Its Memphis location at 5384 Poplar Ave., for example, has shaved its number of teller lanes from seven to three.

With today’s practices, tastes and expectations among consumers, First State Bank Memphis regional president Steve Weaver said he thinks a bank in Memphis shouldn’t need more than three to five carefully placed branches in the local area to get good market coverage. Moreover, at First State Bank customers don’t even have to step foot inside a branch to get certain aspects of the banking relationship started.

First State customers can apply for loans online and can open checking accounts online, without ever visiting a branch.

One local bank CEO told The Daily News the math works out for a typical branch’s operating costs to approach half a million dollars a year. A desire to get away from legacy costs like that helps explain the rationale behind a new project First Tennessee has undertaken.

The bank has launched a concierge-type service in a kind of new bank branch prototype at three locations around Tennessee.

One location is in Memphis. As part of the test, customers are greeted immediately upon walking in to the branch. The person who greets them walks them to a workstation to help with their needs.

When that’s done, the idea is for that same person to walk the customer back to the door. Even more importantly – this prototype, if it catches on, would move the center of the action inside these First Tennessee branches away from “teller row” and out into the branch itself.