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March 4, 2021

A More Virtual Reality: Pandemic shifts bank branch and tech strategies into high-gear

PHOTO | GARY LEWIS Guilford Savings Bank President and CEO Timothy Geelan.
By Michelle Tuccitto Sullo

The coronavirus pandemic has fast-tracked banking habits and trends that many in the financial industry thought would be years away.

Customers who only wanted to do their transactions at branches have over the last year increasingly tried digital tools for the first time, and learned they prefer them.

A decline in in-person transactions means less need for brick-and-mortar branches. While New Haven area bankers don’t foresee branches disappearing entirely, they do think more will close, and the ones that remain will likely be further apart and have a different focus, such as for consultations on big financial decisions like retirement planning, homebuying or taking out a business loan.

Even before the pandemic, the number of banks doing business in Connecticut and branches had declined. In 2010, there were 68 banks in the market, with 1,296 branches. By 2020, those figures had shrunk to 56 banks and 1,094 branches, according to Federal Deposit Insurance Corp. data.

News of more impending closures have been making headlines recently. Bridgeport-based People's United Bank expects to close most of its branches inside Stop & Shop grocery stores in Connecticut and New York in the coming years. The bank, which also recently announced it is being acquired by New York-based M&T Bank for $7.6 billion, indicated it will use the money it saves to invest in digital — including online banking and its mobile app. Waterbury-based Webster Bank has announced plans to consolidate branches across southern New England, including 14 closures in Connecticut. In the New Haven region, these include branches in Cheshire, Hamden, Oxford and Bethany. TD Bank plans closures too — six in Connecticut, including branches in West Haven and Woodbridge.

Liberty Bank, which is headquartered in Middletown and has about $6.8 billion in assets, currently has 59 branches in Connecticut, and recently closed one in Shelton.

David Glidden, president & CEO at Liberty, said there aren’t currently plans to close more specific branches, but he anticipates there will be fewer over the next couple of years — a trend he believes will happen industry-wide.

“They will likely be smaller, and geared more toward advising services,” Glidden said. “Most customers want a branch close by if they need advice or have a problem.”

Liberty has seen a significant change in customer habits due to the pandemic. The bank saw a 54 percent increase in mobile and online services last year, and an 18 percent increase in ATM use. Meanwhile, in-branch deposits were down 22 percent, according to Glidden.

Prior to COVID-19, there was a segment of customers who resisted online banking and preferred to visit branches, he noted.

“We saw a lot of these people, either nudged or forced because of COVID, using digital and online channels,” Glidden said. “We think that will continue. Once everything is back to normal from COVID, we will probably see more branch volume, but I doubt it will ever be the same. As people get more comfortable with using online technology, I don’t see them coming back.”

Because of this trend, Liberty is investing in enhancing the online and mobile experience for customers.

“We want people to feel like they are getting a five-star experience on our website,” Glidden said. “As people’s comfort with online banking rises, their expectations also rise.”

Filling a void

Not all area banks are focused on closing or consolidating branches. Many smaller ones, which are experiencing similar trends in digital use, are adding branches, often filling voids left by others’ departures.

Guilford Savings Bank opened a new branch office in North Haven in early March. It is a westward expansion and seventh location for the bank, which also has six full-service banking centers in Old Saybrook, Madison, Guilford and Branford. GSB has roughly $944 million in assets.

Bank President and CEO Timothy Geelan said GSB is also looking at heavier investment in digital and mobile technologies, “because the pandemic forced it.”

Technology and innovation once on the horizon have been “pushed up big time,” according to Geelan, who also believes pandemic-related consumer behaviors will remain after it is over.

Customers forced to use digital and mobile technology because of the pandemic have been “pleasantly surprised,” by how easy it is, Geelan said, and use of these technologies has accelerated. People are becoming accustomed to managing their finances, and checking balances and transactions on a daily basis, instead of waiting for monthly statements.

“But we feel branches are part of the equation, and we pick our spots,” Geelan said. “I don’t think brick-and-mortar branches are going away. There are folks out there that think they will. But I have a tough time seeing it myself.”

The physical presence between banker and customer in a branch helps “build trust,” he said.

Kyle Eagleson, GSB’s chief financial officer and first executive vice president, said the bank’s service model will always require some branches, though there may be larger distances between them. GSB has changed its vision and mission to be a statewide bank, and is becoming more focused on digital tools, he said. Its branches can serve as engagement and education centers.

“I think the branches can serve as educational points for those who are less tech savvy — where we can do demonstrations of our digital products,” Eagleson said. “You don’t need to take your check to the bank anymore, you can take a picture of it. Not everybody is fluent in that type of technology.”

Digital banking tools offer convenience, but have historically been underused, Eagleson said. Making bank transactions with your phone, checking balances, transferring funds between institutions, sending money to a friend, cashing checks remotely, scanning multiple checks and getting immediate access to funds, can all be done without ever stepping foot in a bank, he noted.

While some customers may have online security concerns, Eagleson notes that electronic banking can be better at mitigating theft. Setting up text alerts about transfers over a set amount is an example, he said.

“I think people who were resistant to technology won’t go back once they see the convenience,” Eagleson said.

Renee Pallenberg, GSB’s senior vice president, director of marketing and cash management, said the pandemic forced the bank to fast-track planned enhancements. The ability to open business accounts online, for example, had been in development, but was pushed up. The use of electronic signatures has also been expanded, she said, broadening contactless services.

New normal

Ohio-based KeyBank, which has 56 branches in Connecticut, is seeing similar trends.

In 2020, and in prior pre-COVID years, KeyBank closed about 2 percent to 3 percent of its branches across its 15-state footprint. In 2021, KeyBank anticipates this rate to jump to about 7 percent, or about 70 out of its 1,100 branches.

Mark Commune, a regional retail leader and senior vice president at KeyBank, is based in Cheshire and handles its New England region.

Commune said the pandemic prompted a significant drop in branch lobby usage, along with an increased use of ATMs, drive-throughs and digital banking.

App use for deposit capture, for example, jumped 25 percent. KeyBank also saw increases in the opening of accounts online.

“We noticed a lot of the clients stayed with the digital channels because they became accustomed to it and it was convenient,” Commune said.

At branches, appointments have become the new normal, rather than drop-in visits, Commune said. This has worked out well for clients and bankers.

“Rather than having people waiting, we were able to carve out time to specifically spend with clients,” Commune said. “This allowed us to spend time to go over their needs, do a quality financial wellness review and give recommendations.”

Big banks vs. small banks

KeyBank, which has roughly $169 billion in assets, has been working to upgrade its digital tools. It has also partnered with Zoom to allow for virtual meetings with bankers, including for small business and consumer financial wellness reviews. While this was initially done to manage virus-related social distancing, it has proven to be so well-received, the practice is expected to continue post-pandemic.

Bankers can share their screens with customers, to give the same experience as an in-person meeting, according to Commune.

Alice C. Ferreira, senior vice president of corporate communications and public affairs for Webster Bank, which has $32.6 billion in assets, said banking industry trends continue to show customers increasingly prefer the 24/7 convenience of using digital and mobile channels for more routine transactions.

“We’ve seen this preference increase across our footprint, and we’ve made investments in our digital banking channels to help customers with more online services,” Ferreira said. “Though this trend started well before the pandemic, its evolution has certainly been accelerated by COVID-19.”

Meantime, with larger banks closing branches, some small bank CEOs say it could provide them a growth opportunity.

Diane Arnold, who will be taking over as president and CEO of $469 million-asset Essex Savings Bank this summer, said when a competitor closed a branch in Old Lyme, her bank saw business pick up in that community.

“I think we are going to see that in some of our other towns as well,” Arnold said.

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