Online banking is changing industry

Sept. 28--The era of the downtown headquarters bank--with its long teller lines, grand chandeliers, plush carpet and persistent smell of cash and paper--is in decline.

In actuality, the moment for the death knell of spacious, well-populated bank branches has come and gone.

With more banking transactions available online and, increasingly, through mobile devices, traffic is decreasing at local bank branches. Banks are responding to this sudden shift in the way they do business.

The American Bankers Association reported that the Internet surpassed physical branches as the preference for banking for the first time in 2008. A 2013 survey from the same organization found that branches remain the second most popular way to conduct banking business, behind online banking.

And the Federal Deposit Insurance Corp. recently reported that the number of branches and bank offices in the United States has declined by more than 3,000 since its peak in 2009.

PNC recently announced plans to close its downtown branch due to low traffic in November.

Union First Market Bank vice president and director of corporate communications Bill Cimino said that Union has also seen the abrupt shift in the industry.

Union has multiple Fredericksburg locations.

Over the last 10 years, the bank has not built as many branches as it typically had. And those branches are smaller than the previous model to accommodate fewer people banking in person.

Charles Driest, online banking manager for Union, said that when tracking was first established for online Union customers in August 2008, there were about 11,000 online users. Now, there are 110,000.</p>

"This is really a reflection of how banks are growing and changing," Cimino said. "We are seeing the number of transactions and the type of transactions our customers are able to do go up. In just the last year and a half more have gone from banking online to just banking through mobile. What we offer online allows customers to have more control."

Recently available options, such as transferring funds and bill pay through mobile banking, have aided the rise of using devices to manage money.

"In the online space, there's a desire to do more and more things," Driest said. "The velocity of change means we need to constantly ask customers what they're looking for."

Driest said the bank branch of the future will have more technology and fewer tellers inside, with an emphasis on convenience, which means having banks near where people live rather than where they work.

He said that in the next five years expect ATMs to be mobile responsive, and in the next decade expect mobile scheduling that will alert a bank when the customer has arrived and what he is looking for.

Community Bank of the Chesapeake, which is new to the region, has found a way to keep the downtown headquarters bank a vital part of its business.

CBTC has branches in King George County and Central Park in Fredericksburg, and plans to soon open in downtown Fredericksburg at the corner of William and Prince Edward streets.

"We know that Fredericksburg is its own market, and we want to be involved in the community so businesses think of us as the place to go," said CEO Bill Pasenelli. "It's a local focus with a personal touch for businesses."

He said CBTC's customers are multifaceted users. While they bank online, as business people they need a location close to their business to go to.

He said that for banks that focus on personal banking, it makes more sense to locate branches close to population hubs, such as developments.

"The whole business of banking has changed so much during my lifetime," he said. "Tellers are no longer flooded on Friday with people cashing paychecks The old days were really not that long ago."

He said that in these changing times, bank workers need to have multiple skills since customers visiting branches are primarily looking for advice.

Those needs will change the way physical banking addresses look, he said. Banks will be more open with less emphasis on teller lines. There will also be a decreased need for back-of-the-house space since cash and paper checks are declining in popularity.

The business model of CBTC relies on its specialized nature. Like grocery stores, which were once very general and now have specialties, Pasenelli said, a similar trend is emerging in banking.

"Most functions that old banks needed room for are now done online," he said.

Lindley Estes: 540/735-1976

lestes@freelancestar.com

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