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Phil Britt
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Generational differences in customer segments are prompting banks to rethink channel strategies.

Channel Preference

Though financial services customers as a whole prefer branch banking, there are clear differences in customers' channel preferences based on age, according to a recent American Bankers Association (Washington, D.C.) survey of 1,000 consumers. Nearly one-third of survey respondents (32 percent) said they prefer branch banking, followed by online and ATMs (each 26 percent).

However, consumers' channel preferences change significantly with age. While banking at a local branch was the clear favorite of 47 percent of those over the age of 55, just 17 percent of those under 34 years of age prefer to bank at a branch. Younger customers ranked branches behind online banking (35 percent) and ATMs (33 percent).

As a result, bankers and analysts say that customer choice has become the mantra of channel managers and bank executives. "We look at ourselves as an integrator of the customer experience," says Stephanie Smith, SVP, Internet services group, Wells Fargo (San Francisco; $500 billion in assets). Nine million customers use the bank's online channel, but not to the exclusion of its branches, Smith notes.

According to Greg Lowell, senior manager of the financial services strategy practice in the Reston, Va., office of Accenture, the branch still is the place for sales of more-complex products. He says 60 percent to 70 percent of a bank's sales come from the branch channel.

Of course, many customers comparison shop using one channel, then buy using another, observes Janis Dodge, SVP of retail banking and consumer banking at Salem, Mass.-based Salem Five ($2.4 billion in assets). She says that a large percentage of seniors compare deposit and loan rates online and then come to the branch to do their actual banking -- complete with a printout of the information they've found on the Web. "We incent our [sales] people to show people alternate ways to do their banking," she says. For example, "We have kiosks at our [branches] so that we can show customers how to use Internet banking."

The Changing Branch

But neither seniors nor younger people need the branch proximity they once did, Dodge points out. "The strategy for retail banks used to be to have a branch every two miles," she relates. "Now the branches serve a much wider area. Rather than having a branch right down the street, [a customer] may have a branch 30 minutes away."

Banks no longer look at the branch system in isolation, Accenture's Lowell adds. Rather, banks look to serve geographic regions with a combination of branches, ATMs and electronic channels. "When banks build, they are looking at growing organically," Lowell says. "They look at the whole servicing element." Additionally, the branches themselves are becoming a mix of full-size facilities, grocery store locations and everything in between, he continues.

Realizing that younger generations won't use branches with the same frequency as their parents, banks also are changing their ownership interests in new branch facilities. Rather than buy buildings that may have less use in the future, banks now are opting to lease facilities. For example, Salem Five, which has grown to 20 branches from just nine in 2000, has a blend of traditional owned sites, leased sites and "retail condominiums," according to the bank's Dodge. **

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