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Why banks still build branches

January 11, 2019

Frost Bank can’t seem to build branches quickly enough.

It’s planning on opening a branch a month over the next couple of years.

In this issue of Texas Inc., the bank’s CEO Phil Green says customers want branches even if they don’t use them.

“Sixty percent of our accounts in the Houston market are within 5 miles of an existing branch today,” he told reporter John Roper. “I think this is true of consumers: They want to know that a branch is nearby if they need anything.”

When was the last time you were in a bank lobby? Was there even a line? Perhaps it wasn’t completely empty. Three-quarters of 2,500 U.S. consumers said they had visited a bank branch in the past two years to conduct a transaction, according to a recent survey by Celent that was commissioned by Samsung. Half said they visited to get information, open an account or get a loan.

The fact is, the digital age has not killed bank branches, as many industry observers have long predicted, although indeed there are fewer branches today. In 2009, there were 100,000 branches across the nation. Today there are 88,000.

Why does the world still need bank branches when banking is increasingly done with direct deposits and smartphones?

Where are banks supposed to office their employees? Despite all the technology, someone’s still got to work. Why not spread out the workforce in smaller offices across the entire market instead of making everyone commute to downtown areas?

Bank branches serve as billboards. We know the brand Mattress Firm because the company seems to put showrooms on every block. For Frost, building branches is an essential step in its Houston expansion.

Digital technology is great for serving millennials, but older consumers are typically the ones with the money. Many of them prefer to interact with people, not apps.

Some consumer banking transactions are complicated. For these matters, it’s always more comforting to deal with a banker face to face. Even if one’s finances are never that complex, like Green says, it’s good to know there’s a branch nearby just in case something does get tricky.

Oh, and then there’s the sucker. When you bank online, you don’t get a free sucker.

al.lewis@chron.com

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