StrategyCorps | Mobile Report

Wells Fargo Mini-Branches And The Shrinking Retail Footprint

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Wells Fargo is launching a new branch concept — what it’s calling “the neighborhood bank format” — with a footprint one-third of the size of a typical location.

Wells Fargo is rolling out a branch prototype design with a smaller format that the bank hopes will allow it to reach more micro markets that aren’t suitable for its conventional larger stores.

Subscribe TodayThe new format is approximately 1,000 square feet. A traditional Wells Fargo location is typically between 3,000 and 4,000 square feet.

It also features a paperless workflow and new large-screen ATMs.

The first location using the new design will open in the trendy NoMa neighborhood of Washington, D.C. on April 15.

“With this new store concept, we’ll be able to offer person to person sales and service along with leading banking technology in settings that previously would have discouraged us from building a store,” said Jonathan Velline, head of Wells Fargo ATM Banking and Store Strategy.

“The day of the big branch doesn’t make sense for the customer or the bank.”
— Andy Harmening,
Bank of the West

Branches are central to Wells Fargo’s strategy, Velline explains. “This new neighborhood bank concept complements our traditional stores to help us bring the Wells Fargo store experience to more customers.”

According to research conducted internally by Wells Fargo, 80% of customer transactions don’t require employee assistance, but 70% of customers still visited a branch every six months.

Kiosk & Display | Digital Merchandising for Financial Institutions

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Rumors about the death of branches have been circulating for nearly two decades, although with the advent of mobile/tablet solutions such sentiments are being echoed at an ever-increasing volume today. Wells Fargo poo poos this position.

“We’re not closing stores. We’re opening stores,” Velline said. “We’re trying to make ourselves more convenient for our customers.”

Velline said in designing the new store format Wells Fargo paid special attention to creating areas within the smaller layout where team members and customers could conduct business and have private financial conversations. Advanced technology allowed for the elimination of paper-driven back-office processes, increasing space efficiency and creating new store location opportunities, Velline says.

“The operating expenses are going to be somewhere around 50-60% of a traditional store,” said Velline. “And that means as I’m considering opening up new stores, I can effectively have two of our neighborhood banks for the price of a traditional store.”

According to the Wall Street Journal, typical branches are larger than 4,000 square feet and cost roughly $3 million to build, depending on the size and other features. Older branches can be as large as 10,000 square feet.

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The branch’s walls will fold in at night so that only the ATMs are available to customers.

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No traditional tellers. No safe deposit boxes. No private offices. Bank employees will walk around with computer tablets fastened to their hands.

Kiosk & Display | Digital Merchandising for Financial Institutions

( Read More: Branch Design Showcase: The Sleek, Slick and Ultra-High Tech )

This new branch concept offers technologies found in traditional Wells Fargo stores, such as ATM software that anticipates a customer’s preferred transactions, instant issue debit cards, and eReceipts. It also will have wireless tablets and phones that team members will use to serve customers.

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( Read More: Wells Fargo ATMs Can Predict What People Want )

“Customers are going to a branch for a reason; it is to deal with people, not an iPad.”
— David George, R.W. Baird

A free wireless hotspot will also be available for customers to use. After hours, the store transitions into a smaller lobby format, providing customer’s access 24/7 to several ATMs that dispense $1, $5 and $100 bills in addition to the $20 bills a typical ATM offers.

To develop the new branch concept, the bank built a prototype in a Chelsea basement.

“We storyboarded it out, but there’s only so much you can tell looking at 2-D paper,” he explained in an interview with CNBC.

Creating life-size beta labs to test branch designs before deploying them publicly is becoming an increasingly common practice in the financial industry.

( Read More: Concept Branch Built From Cardboard Prototype Features Herb Garden )

“We expect to evolve the concept as we receive feedback from the new NoMa store,” Velline said. “We believe in using customer feedback to test and learn new products, technologies and services as we seek to continuously provide leading banking experience that meets all our customers’ financial needs.”

Wells Fargo has $1.4 trillion in assets, 9,000 stores and 12,000 ATMs across North America.


EditorJoin hundreds of the brightest minds in banking at The Financial Brand Forum 2015 — two full days jam-packed with the latest ideas, insights and innovations. Highlights include keynote speaker Josh Reich from Simple, three makeovers live on stage, and the ‘Branch Experience Lab’ in the heart of the exhibit hall. Click here to learn more.

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Comments

  1. Wells Fargo is taking a savvy step in the evolution of their delivery channel strategy. Branches remain a key component of successful omni-channel delivery systems. In fact, well-conceived and operated branches are building The 4th Place mental construct for customers using remote delivery channels – the branch as positive subconscious reference.
    Size is important in the new metric. More touch points and relationship building opportunities at lower cost and faster speed to market. Today it is popular to tell banks or credit unions that branches need to be 2,500 sf., 1,500 sf. or 800 sf. to be efficient and profitable. These sizes are right for some markets and wrong for others. Branch size should be engineered to market opportunity. In some markets where neighborhood branches can be applied like Starbucks stores, the lease cost per square foot can top $100 per sf., or the market is limited, small neighborhood branches are perfect. But in other markets the right size may be 2,500 sf., 3,500 sf. or even 5,500 sf. For example, Umpqua Bank is famous for the very successful 2,500 sf. neighborhood branch concept they developed a number of years ago (“Something New in the Neighborhood” – ABA Banking Journal, August 20, 2011).
    I applaud Wells Fargo for their understanding of the real value of branches.

  2. It has been interesting to see the press this small branch has garnered. My company has been on the forefront of small branches for nearly a decade. We saw many years ago that the financial ROI (IRR) of large, highly designed branches were not sustainable. Sadly many financial institutions did not. The market decline in 2008 brought this reality to the forefront for many banks and credit unions. Fortunately, our clients were already prepared with branches that cost 40% less to build and 50% less to operate. The downturn for financial institutions was a wakeup call to rethink their branch network. The NovoBranch concept fulfills the need for a branch that can be deployed in markets with high concentrations of competition or just low deposit potential. They are stellar in markets that can provide typical deposit levels. Our branches typically size out at between 1,600sf and 2,500sf, primarily because those are very common and available retail spaces and large enough to house a full service NovoBranch.

    As it happens, I worked with the retail director at Umpqua eight years ago when they started to consider the neighborhood branch idea. A branch model that allows a financial institution to maintain branches in a desired market will ultimately win in that market. Branches are not dead or going away, they are, however, getting smaller and smarter. It is the rare case when a bank or a credit union can justify a huge palatial branch full of expensive materials and loaded with staff. Not that many old-line designers and architects don’t still push for them, they do but more FI’s are waking up to the financial reality of branching in the 21st century. Our estimates are that more than half of all successful future branches will be of the NovoBranch model.

  3. Robert,

    You’re right. Generally speaking, most FIs will struggle in the future to justify anything over 2,000 s.f. and more than 5-7 FTEs.

    Umpqua’s widely celebrated flagship branch in the Pearl District is very efficient — seems like around 2,000 s.f. or so, including the back office space.

  4. CHARLES STRULOVITZ says:

    The concept of the new bank prototype in the suburbs can be very interesting. It can give the client the speed of doing their banking without the feel of walking into a cold feeling office. The staff has to reflect the feel of the branch and all should be able to help within the branch with the branch functions without having to pass off to other staff and waiting time will be the key to this branch and a full service branch should be within a realistic driving distance.

  5. I’m glad to hear that a bank like Wells Fargo is taking the next step into branch innovation. Certainly, these are times in which traditional banking as we know it is ending. Financial institutions need to find clever solutions to keep face-to-face interaction (which is still the preference) while the world is leaning towards the online and mobile service.
    A study conducted by PwC revealed that 62% of banking customers identify internet as their preferred banking method, while only 20% preferred branch banking. However, 38% of these customer do prefer in-person interaction when dealing with more complex banking issues. So the question is, How will banks work their Branch Strategy ?
    Will banks be able to find a balance between online services and in-person interaction? Well, the solution is quite similar to what Wells Fargo is doing.

  6. All these studies trying to guess which channel consumers will want in the future are somewhat overblown. The reality is that American consumers want ALL channels at their disposal and they do not care what that means to their financial institution. In the consumer driven market, the winners will be those that manage that wide-ranging delivery and maintain not only their balance sheet but also their P&L.

    Ten years is too far to look ahead if you are actually attempting a complete overhaul of your bank or credit union. Things are changing too fast, for what used to be a typical planning timeframe. Younger consumers are willing to make changes as new technology becomes available, IF THEY like it.

    I have yet to meet a bank or credit union that would turn down adding branches if doing so did not cost them anything. Consumers like branches and smart banks and credit unions like to have consumers become customers. They key is being able to maintain or add branches in a desired market without breaking the bank, pardon the pun. The NovoBranch by Branch Development Group provides one solution that is catching on quickly. It is a branch strategy as well as a branch model and it combines the small cost-effective footprint of a micro branch with the full service feel of a typical branch. Consumers like this convenience, size and delivery style and the financial institutions like its low capital cost and low operating costs. There is actually a good case for more branches, of the right size, than fewer branches.

  7. I love that Wells Fargo is talking about making their stores more neighborhood friendly, but I have always experienced their good side first hand! I live just a few minutes from my local Wells Fargo at home and when I was in college, my branch was in the same building as a Starbucks, with an after-hours ATM available, as well as another outdoor drive-up ATM a block away. I am a big fan of Wells Fargo services, but have always had my parent’s banking team behind me, and have not seen positive response towards WF from my peers. As I now am in charge of my own funds, etc. it’s good to know they are pushing efforts to make it easier and “cooler” to bank with, especially for us Gen-Y’ers. Great strategy!

  8. What goes around comes around. Small neighborhood branches was the beginning of branch banking many years ago. Why the banks continued to increase the size of the branch buildings was ways a mystery. Glad to see that Wells Fargo is turning back a page in hoodistory and placing these facilities to neighborhood locations .

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