Lessons Learned while Caffeinating with Cap One

By Mark Gibson

When Capital One bought ING Direct, many in the banking industry thought it would close the handful of orange “brand cafes” that blended coffee with high-rate savings accounts. Exactly the opposite happened, with Capital One recently celebrating the opening of its 29th Capital One Café in Austin, Texas.

Why is Capital One continuing to expand its nontraditional branch network? And what can we learn from it?

First, it’s important to remember that Capital One was originally a credit card company. Some of us are old enough to recall it was the credit card spin-off of Richmond, Virginia-based Signet Bank. Decades later it returned to the banking business through acquisition, primarily in order to obtain deposits to fund its credit card loans.

Just as importantly, Capital One has established a national brand to support the sales of its credit card—even though it has a traditional branch network in only a handful of major markets. This leaves untapped brand potential in many markets across the country.

In other words, there are plenty of existing credit card holders in markets around the country who would be willing to open checking or savings accounts with Capital One—if only they had branch presence.

It may be that Capital One has found what most digital banks have found: No matter how much you spend on fantastic, easy-to-use technology and great TV ads, there is a limit to how much you can grow in a given geography without a physical presence.

And thanks to ATMs and mobile deposit, a more recent entrant to a market like Capital One can provide the personal comfort of that physical presence with far fewer outlets than in the past.

In fact, in most markets, Capital One has determined that one or two outlets are sufficient to serve an entire city. As branch activity becomes less routine and higher-value, people visit less frequently and are willing to travel farther. Capital One and other shrewd operators have done this math, and it’s driving their lean network decisions.

During a recent visit to a café, the strategy was on full display. Most customers visit for a cup of Peet’s coffee. After all, the sign on the door says “Capital One 360 Café.”

Lesson One: Become a destination to create lobby traffic in an age of digital banking.

As the coffee patron walks from the entrance to the counter, she passes an attractive display for an upcoming money workshop. Interesting. Capital One knows that most people, but especially millennials, are not confident money managers and want to learn. To quote its website, the bank’s “Café Money Coaches can help you define goals, introduce you to new perspectives about money, create financial action plans—and plenty more. It’s free for everyone and super easy to schedule a session.”

Lesson Two: Educate and drive additional lobby traffic.

After ordering her latte, she hands the Peet’s Coffee barista her debit card, and he grimaces slightly and says, “No Capital One card?” When she shrugs, he adds “Too bad, you would have saved 50% on that!”

Lesson Three: Engage your business partners and clients in a win/win value proposition.

Once our hypothetical coffee patron sits down in the comfy sofa to enjoy her latte, she’s approached by a polished young woman in a Capital One-logoed oxford who asks, “What brings you in today?” Our patron states the obvious: “Coffee.” But then she inquires about the money workshop.

The Capital One team member explains that the café not only services existing Capital One credit card and deposit clients (it even has an ATM hidden in the back to accept cash deposits), but it also provides outreach to the community.

She explains that the workshop is free to anyone, and features a Capital One money coach who helps you understand basic concepts so you can better control your financial future. She also explains that her team of 10 associates are also very active in community and social organizations around town, always distributing goodies like water bottles and t-shirts. Through all of that outreach, the team builds community goodwill and brand awareness.

Then the brand ambassador points to a nearby digital sign. “Did you notice our special savings offer? Lots of people find it attractive. You can really make your money work harder.”

Lesson Four: Don’t be afraid to talk about solutions that would help people.

“See this IPad?” the employee says. “It allows me to do everything I need to open your account. I use the same software you would use if you went online at home. Our mobile interface is the same as our desktop, unlike most banks. And it’s really easy to use. I can get you up and running, including transferring money from your old bank and getting you set up on mobile banking and mobile deposit, in just 10 or 15 minutes.”

Lesson Five: Re-engineer your new account opening process to match the best eCommerce players.

Of course it doesn’t make sense for every bank to copy the Capital One 360 Café concept unless the strategy and situation are similar. But it does make sense to study what banks like Capital One, Umpqua, Chase, and other innovators are doing. Try to understand what you can learn from them, and what the implications might be for your business.

Lesson Six: Introduce challenging and uncomfortable ideas and trends into your strategic planning process.

The most powerful lesson is this: While many in the banking industry ponder how many branches to close, one of the most technologically savvy banks in the industry knows that the only way to truly create and nurture relationships with the vast majority of consumers is the good old-fashioned way—face to face. There’s a lot to learn from that.

Mark Gibson is senior consultant at Capital Performance Group, a strategic consulting firm that provides advisory, planning, analytic, and project management services to the financial services industry. Email: mgibson@capitalperform.com. LinkedIn.

To learn more about the concept of bank branch cafés, read Kerry O’Leary’s “More Than Just a Drink” in the ABA Banking Journal.

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