Branch Transformation: American Bank of the North

Chris Nichols and Marci Knight

Chris Nichols, chief strategy officer for CenterState Bank recently sat down with Marci Knight, CMO for American Bank of the North—a $550 million community bank with nine locations across northern Minnesota—to get her thoughts on the future of the branch and what customer engagement looks like over the next ten years.

Nichols: How does your bank think about the branch network ten years from now? More or less branches? Will the size be shrinking? What will the branch look like?

Knight: American Bank of the North sees the branch network primarily being mobile—where our customers, and potential customers, are accessing us through our website either on a computer, tablet or phone app. Due to our geographic location and customer base we will continue to serve our communities with brick-and-mortar. One of our challenges going forward is to strike the right resource balance between mobile and brick-and-mortar.

While the number of branches are decreasing, total branch deposits are increasing. We are seeing more business get done in fewer branches. It’s said that 80 percent of transactions can be done outside the branch. Our strategy is to find that balance and to focus on the customer across different delivery channels. We want to craft a strategy that includes both technology and service with the goal of creating a high-level of engagement and efficiency across all channels. In short, we want to serve our customer better, faster and wherever they are.

Our strategy, to date, has been to upgrade our branch portfolio. We closed three branches this past year and a total of seven branches in the past five years. Next spring we will be building a new 8,000 square-foot “future branch” and we will consolidate three branches into one. While this new branch will be one of our largest to date, it will be better optimized for space as we will have a co-tenancy strategy to help reduce cost, provide us flexibility and to increase foot traffic. We will look at adding some of our high-value target-market customers into our building (e.g., orthopedic surgeons, a coffee shop, etc.). The new branch will focus on better technology for our staff—teller cash recyclers, interactive screens, pods instead of a traditional teller lines, etc. For our customers, we will have a technology bar where customers can sit, relax and recharge their devices while looking at our interactive digital screens that will engage our customers with financial plus product education. We will also have a space for children to learn about banking. That will also be interactive, with computers, tablets and games. To top it off, we will have a community board room that customers can sign up on their own to use to hold meetings. Plus we will be hosting educational “lunch and learns” with various customer segments.

Nichols: How important is it for your bank to proactively transition clients from the physical branch to online or mobile?

Knight: This is very important to us, and right now and we have this transition goal set as a critical driver for our frontline staff. The driver is to increase online banking (OLB) activation and to cross-sell ancillary products (e.g., estatements, edeposit, P2P, etc.). Unfortuantely, in our communities, we don’t have four year colleges so we tend to see students leave the area for higher education. As such, it is very important that we can offer mobile products to these students so they can continue to bank with us wherever they end up. The same for our snowbirds that leave. We want to provide them with our full line of banking services year around instead of giving them a reason to open up an account down south—say, somone like CenterState.

Nichols: What have been your bank’s more effective tactics in getting customers comfortable with their mobile banking products?

Knight: We purchased iPads for our personal bankers and radically changed our workflow of the account opening process.

Instead of opening the core account (checking/savings) first, we determine what products/services the customer wants—and then we open the OLB [online banking]products first. While the customer is getting themselves set up within OLB, the banker then moves to open the traditional core accounts. When the core accounts are opened, we then can link them to the OLB accounts. And while the customer is in front of us, we can go through each mobile product and provide education. We have found this to be very beneficial and it has increased our activation/penatration rate by 83 percent in all OLB products. We’re getting the customer to do everything right at account opening and to let the customer fend for themselves. We can then give tutorials or direct them to where they can find more information on our website.

For existing customers, we recently added an ebanking support center, which is staffed with three FTE’s. This group does nothing but work with customers regarding mobile and OLB products. This has been very effective as well. And we’ve seen a reduction in support calls to our branches and a reduction in total customer calls, particularly the lower value ones such as pin/password resets, cache of their website, and similar.

For our younger customers, we not only teach special classes on how to use our student products, but we also go into the schools and teach classes on banking. The schools in our area are very hands-on and like that we come into the class and present. We use to have a financial literacy program that was from a third-party vendor, and we found that the schools had a hard time fitting it into their curriculum. So, we decided to recreate the course ourselves. This has prompted us to build that youth center that I discussed earlier within our new branches.

Nichols: Is your bank planning products around voice banking (using Siri, Alexa, etc.)? How mainstream will this become?

Knight: At this time we are not, only because our focus is centered on getting greater engagement with our OLB and mobile products. Digital assistants like Siri, Alexa, and Google Home are the most recognizable devices in ambient computing and we are keeping a close watch on trends. The mobile app is the core of customer digital interaction, and we at American Bank believe that in time voice banking will become a rich extension of the app. It is one of our goals to better learn how our customers would like to use these digital assistants for banking and financial education. Of course, we are also paying close attention to security as that will drive a large part of how we allow the consumer top use voice banking. Extra security measures will be needed and I’m assuming that would include account set-up authentication, codes and multifactor authentication.

We do believe that voice banking is just the beginning of what will come for the future.

Nichols: What products or new product areas does your bank foresee in the future (e.g., AI, virtual reality, mobile products, etc.)?

Knight: Artificial intelligence is very interesting to us. Seeing what the Royal Bank of Scotland developed with IBM’s Watson in Cora is pretty amazing. I believe that is the future of banking for products and using more AI to market to our customers. AI essentially will help free us from the mundane so we can do things that are important—and that is focus on helping people make better decisions.

Faster payments is going to be on the forefront of the future of banking, along with mobile contactless payments. Achieving a faster payments system will be challenging because of the infrastructure that will be needed for completing an end-to-end payment from initiation to settlement, plus reconciliation in real time. We have an employee who resides on a “faster payment systems” advisory group for FIS and VISA/MC. And they meet twice in person, and then monthly calls. For us, as a small community bank, we were honored to be asked to sit on this advisory board, as it provides us an advantage to understanding and planning for the future.

Nichols: Will interest checking, savings and money market accounts all survive in the next decade?

Knight: As along as we have brick-and-mortar, we believe at American Bank these products will survive into the next decade. As we move into a more contactless world, there is a percentage of our customer base that rely on traditional banking. As mentioned above, we will need to create a branch strategy that is sized for the future of banking but best serves the changing consumer behavior and expectations.

Chris Nichols and Marci Knight recently discussed the how’s, the why’s—and the why-not’s—of transitioning customers from the branch in a lively panel discussion that also included Chris Fritz, SVP and head of digital solutions at SunTrust and Beth Johnson, CMO and head of virtual channels for Citizens Bank in Providence, R.I. The panel took place at the 2018 ABA Bank Marketing Conference in Baltimore.