Washington is about to become a retail battleground for banks.

The announcement earlier this month that PNC Financial Services Group Inc. of Pittsburgh plans to take over Riggs Bank and open 30 new branches is only the latest indication that competition for the retail customer here is ratcheting up dramatically. Two other out-of-state banks have aggressively targeted Washington for their new-style banking operations, which embrace such modern retail concepts as Sunday and evening hours, incentive pay for bank employees based on customer satisfaction surveys, and bank branches that resemble hotel lobbies.

The three banks plan to invest millions of dollars over the next three years in a race to build or refurbish bank branches throughout the region, the first major new competition in the Washington market in two decades. Bank experts predict the new competition will force other major banks here to follow suit. Already, increased competition has led many banks to offer basic checking accounts and online banking products at low or no cost. (Fees for many extra services remain and could go higher.)

"The concept of the traditional retail banking model in my opinion died many years ago," said Terrie Spiro, Washington regional president of Tennessee-based First Horizon Bank, which recently began opening new "stores" in Northern Virginia. "What people are looking for is convenience, long hours, easy access through various distribution channels, a one-stop shop, and hours to match your schedule."

The changes are being driven by a renewed focus on consumer banking as a profit center, a shift that began about two years ago during the recession as the traditional commercial banking business lagged. Banks especially started targeting professionals in the 35-to-50 age group, with their multiple mortgage refinancings and the alacrity with which they adopt new technology and invest their money.

The trend toward convenience as the main selling point for customers is being driven by an upstart New Jersey group called Commerce Bancorp Inc., which stormed Manhattan in 2001. In three years, the company has opened 50 "stores" in downtown New York and Long Island and collected more than $4 billion in deposits there, an amount roughly equal to the entire deposit base of Riggs Bank. Commerce Bank said most of that money was withdrawn from three New York banks: Citibank, Fleet Bank (recently bought by Bank of America) and J.P. Morgan Chase & Co.

Other banks, particularly Bank of America, have studied Commerce Bank's methods closely and have begun mimicking them.

Commerce Bank's next target is Washington. Executives at Bank of America, which will be its biggest competitor in the Baltimore-Washington market, said they are ready and have already begun changing their hours, branches and product offerings to compete.

From Burger King to Banks

Vernon W. Hill grew up in Fairfax County. Out of college, his first job was scouting sites for McDonald's. Today, he is also a franchisee for Burger King in New Jersey. In 1973, he and a group of investors started Commerce Bank in Cherry Hill, N.J.

"Commerce is less of a bank and more of a momentum force for change in the banking industry," said Arnold G. Danielson, a Rockville consultant who has studied Washington area retail banking for more than two decades.

"Eventually Washington is going to be a 200-store market for us," Hill said. "We'll open up 10 to 15 stores in the next year, and it will accelerate from there."

BB&T has 206 branches, the most in this market now. Hill says he wants to take the top spot by 2010.

"The widespread prediction was that they would fail miserably in New York," said Gary Townsend, an analyst who follows Commerce for Friedman, Billings, Ramsey Group Inc. in Arlington. "What they proved was the model they had developed in New Jersey would work in a variety of different markets, including heavily banked markets."

Commerce opens new branches in places where a fast-food restaurant would open: heavily trafficked commercial corridors in both downtown and suburban locations. Its stand-alone branches look a bit like the old Hardee's restaurants.

Hours are liberal. While they vary by location, the basic hours are: from 7:30 in the morning until 8 at night during the week; 7:30 to 6 on Saturday; 11 to 4 on Sunday.

The Commerce branches are typically twice as large as a traditional bank branch, with broad, well-lit spaces, a free coin-counting machine and clutter-free desks.

The hours, Hill said, are what attracts customers at first. But Commerce also seeks to eliminate many of the other small indignities. Employees are trained to snatch customers away from lines that get too long. Commerce customers can use any ATM, at any bank, and will not be charged an extra fee. Checking accounts are free as long as there's a $100 balance.

Commerce makes money from its deposits. Danielson said that is because Commerce is so adept at gaining new consumer business, it has relatively high deposit retention rates, and most of its depositors are making no or very little interest on their money.

Essentially, Commerce has a $24 billion pile of dirt-cheap money from its branches, Danielson said.

Bank of America's main North Carolina-based bank, for example, paid about $1.19 in interest expense for every $100 of assets on its books in the first quarter of this year. Commerce Bank's main New Jersey bank paid 69 cents per $100 of assets. Commerce makes money on the wide difference between what it is paying for money and what it is earning from it. In the first quarter, the difference between what Commerce earned on $100 and what it pays for $100 is about $4.28. For all banks in the United States with more than $10 billion in assets, according to the Federal Deposit Insurance Corp., the margin is $3.67. The comparison is stark: In banking, such differences are usually measured by a few pennies. Townsend said Commerce then plows nearly all its profits back into its branch network and its service offerings, opening more branches and keeping its fees low.

In the past three years, Commerce's deposit base has grown about 40 percent each year, without Commerce buying any other banks. Total deposits in the U.S. banking industry have grown about 10 percent a year in the same period.

From its New Jersey base, Commerce now competes in New York, Philadelphia and Delaware. While still dwarfed by its huge competitors, even in its home base of New Jersey it has one-fifth the deposit market share of leader Fleet Bank (now Bank of America), Danielson said Commerce has changed every market it does business in.

"Sunday banking is going to be a reality for banks in Washington, and Commerce is going to make it happen," he said.

Nonetheless, Danielson said Commerce will not find the Washington area as easy a ride as Manhattan. First, he said, retail locations tend to be more expensive and harder to find here. Also, Commerce's competitors in Washington, mostly North Carolina-based behemoths, learned the lessons of Commerce in New York and have already begun positioning themselves to compete.

"I think you're going to have a stronger reaction from the big guys than you had in New York," he said. "In this market not only do you have three or four big banks that are good competitors, but you also have Chevy Chase Bank, which is a strong local competitor that is not going to give ground to someone from the outside."

Defending Their Turf

The signs of the coming competition are everywhere. Riggs Bank, before its recent legal difficulties, had hired a former Starbucks executive and laid out plans to remake its branch network along the lines of Commerce's, including Sunday hours. Brian Goerke, a spokesman for PNC, confirmed that PNC will keep with Riggs's plans to open more of its branches on Sunday, which would make them PNC's first stand-alone branches with Sunday hours. Also, Chevy Chase, owned by the fiercely competitive B. F. Saul II, has begun lengthening its hours and is now open on Sunday in its Giant supermarket branches. At Chevy Chase and about every other major bank here, free basic services, such as checking and online banking, are now the norm.

And the free coin-counting machine, one of Commerce's signature store experiences, are popping up at bank branches all over town.

Washington area customers do not need to wait for Commerce to open to see what banking there is going to be like. First Horizon Bank, an affiliate of First Tennessee Bank, has opened seven offices in Northern Virginia in former First Virginia Bank branches that it refitted. From the coin-counting machine to the late hours to the self-service safe deposit boxes, First Horizon's "financial centers" are closely modeled on Commerce's concept.

Spiro, a longtime area banker that First Horizon hired last year to lead its retail banking rollout in the Washington area, said that at least two dozen offices, and probably more, will be open in the coming years, though she declined to provide a specific target. The company is hoping to have a retail banking presence commensurate with its mortgage banking operation in the region, which stretches from Baltimore to Richmond. First Horizon's profit strategy relies heavily on its ability to cross-sell financial products, such as mortgages, insurance and investment services, to banking clients, and vice-versa.

Last week, Patricia Brockbank walked into the First Horizon office on Lee Highway in north Arlington at 7:45 p.m. Brockbank, an entrepreneur, has been banking there for three months, and chose First Horizon after looking at seven or eight banks. Inside is an abundance of flat-screen televisions showing the Bloomberg News financial channel, customized with First Horizon logos. The room is dominated by a large screen centered in a living-room-like area with planters and a couch. There's free coffee.

Brockbank was first attracted to First Horizon because of the rates on certificates of deposit but has been most impressed by the service. "I've not seen this from other banks and I'm tired of rudeness," she said.

The long hours were not part of her decision to bank at First Horizon, but now she is hooked. "Isn't that amazing? Look at me, look at the hour," she said. "This is very revolutionary. This is again, to me, accommodating the working person, the hectic life we're all struggling to survive in."

Lush Lobbies

In Maryland, at the Bowie Town Center mall, Bank of America in April unveiled its own answer to Commerce. The bank, which with about $12 billion has the second-largest deposit market share in the Washington area, plans to have 22 of the newly designed branches in the Baltimore-Washington market, 500 of them nationwide. At the Bowie store, the customer is greeted with an open sales floor and a "media center" with a 42-inch flat-screen television surrounded by plush leather chairs.

Sandy Dunleavy, senior vice president and Mid-Atlantic consumer executive for Bank of America, said the office is just part of Bank of America repositioning its entire retail operation around convenience: multiple, low-cost ways for customers to do banking business whenever they want, including late hours. So far, Bank of America has not set Sunday hours.

Like First Horizon, Bank of America has put all employees at the new branches through a rigorous training program. Managers' and employees' raises will be handed out not just on how much business is generated, but on several measures of customer satisfaction, such as how many complaints are received for poor customer service.

Dunleavy said the changes are not in anticipation of Commerce, but a response to many years of customer complaints.

"We listened to our customers," she said. "They want consistency, convenience and ease of banking. . . . All these changes are based on customer feedback on what they want to see when they come into the store. It just doesn't feel like a bank."

These trends will probably be concentrated at the large banks with the biggest deposit base. Large banks like First Horizon, Commerce and Bank of America can afford the two and even three shifts of workers required to keep a branch open for 12 hours a day and on weekends. The dozens of smaller banks in the Washington area probably will not be able to absorb those kinds of costs, nor will they be able to pay for a wholesale refitting of branches.

Bank of America does have one disadvantage. Its 271 branches in the Washington-Baltimore market are an agglomeration of half a dozen old-line banks that it bought in the 1980s and 1990s, many of which were first built in the 1950s or 1960s and don't fit the new mold.

"Some of the physical constraints of existing centers make it hard," Dunleavy said. "I would love to have a magic wand and make all of our stores look like the new ones."

Hill said he remains skeptical of Bank of America and other old-line banks that have copied his model. "Talking about it is one thing, doing it is another," he said. Washington will be the first market in which Commerce competes with Bank of America.

One thing is certain, consumers here are in for better days. "It's nothing but positive" for the banking customer, Danielson said.

Staff writer Raymund Flandez contributed to this report.

Vernon W. Hill, above, founded Commerce Bank. Employee Christopher McCrum walks Elvi Giraldez to her car on a rainy morning in Evesham Township, N.J.