The mergers resulted in fewer branches in the highest-density urban areas -- "branch consolidation" cut per capita branches in the most populous markets by 12 to 15 percent in the United States and Canada, according to a 2003 study by the consulting firm Booz Allen Hamilton Inc. Although that may have improved the bottom line in the short term, the study found that it demoralized customers, who, as it turns out, liked to buy financial products in a branch.
Banks that plan to open new branches are targeting areas of the highest growth and incomes, particularly suburbs and only limited areas of downtown. But some new branches are planned for areas that traditionally have few banks, such as Southeast Washington and the inner suburbs of Prince George's County. Since Jan. 1, 2004, only five branches, one of Bank of America and four of Chevy Chase Bank, have been established in Prince George's County. During the same period, 14 were established in Fairfax County and eight in Montgomery County. In the District, 15 were established, all but one in Northwest, and one in Northeast.
The Booz Allen study found that despite efforts to move customers out of branches, 72 percent of all new sales of financial products still took place inside them. ATMs do not require health insurance or have children in day care, but they are not a great way to build a customer relationship.
"Banks have trained their customers to expect as little as possible and get out of the branch," Silverman aid. "It's an errand mentality. What banks failed to recognize is that the way banks make money, their most valuable asset is the branch visit."
Banks, he said, are beginning the arduous transformation from monolithic, bureaucratic institutions into retailers, trying to lure customers the same way a Starbucks or an ice cream shop invites passersby to come in. Several banks have established branch banking at grocery chains including Giant Food, Superfresh and Wal-Mart Stores.
Wachovia Bank, which has the biggest market share in Washington and is the product of a series of mergers over the past 15 years, recognized that last year. Even though it has one of the most extensive ATM networks in the region, three weeks ago it expanded hours at 30 percent of its branches in the Washington area to 7 p.m., and expanded hours on Saturday until 4 p.m. at 40 percent of its branches.
Samuel A. Schreiber, president of Wachovia's Washington operations, said early indications are positive. "We're seeing an increase in sales during those later hours, and obviously seeing an increase in service visits and teller transactions," he said.
Schreiber said Wachovia is building more branches in the area, six of which are to open this year and a dozen more over the ensuing 18 months.
Banks like Wachovia have good reason to bolster their branch networks. First Horizon opened its first branches about a year ago and promises as many as two dozen more. PNC Bank, which recently bought 51 Riggs Bank branches, says it will open 30 more by 2007 and has slashed some deposit fees in Washington that it charges its customers in other markets.
Commerce Bank, meanwhile, will open its first two branches in the area next month at Dupont Circle in the District and in Manassas.
Many of the retail banking concepts that Commerce pioneered in New Jersey, Philadelphia and New York in the past 10 years -- free checking, night and weekend hours, self-serve change machines, cut-rate or no-fee electronic banking and a hyperactive sales-and-service culture -- are being copied widely by other banks.
"It's put more of the retail flavor into a traditional financial services industry," said Neil F. Hall, chief executive of PNC's regional community banking and head of all of PNC's consumer and small business banking services. Commerce Bank doesn't depend on high rates for deposits to attract customers. Commerce said its customers choose it for two basic reasons: It's convenient and they like the people in the branch. Its employee culture is more like that of a Walt Disney theme park than a traditional bank. Chief executive Vernon W. Hill II modeled its "Traditions" training program on Walt Disney's cultural orientation for new employees.
