The Branch of the Future is Already a Restaurant or Coffee Shop
Banks are closing more branches than ever & for good reasons. That doesn't mean banks should abandon branches. I discuss 5 reasons for banks to meet customers at branches. Converted branches.
Source: Stessa Cohen
Or a coffee shop, or a brunch spot or maybe apartments.. Maybe the branch of the future is a combination of any and all of these.
As the number of closed bank branches increases in Cincinnati, to Rochester to Philadelphia and beyond, those branches are increasingly converted to other commercial uses. The photo above is a former bank branch converted to a now popular café.
There’s no mystery as to why.
Bank branch real estate is expensive, customers foot traffic is waaay below what it used to be and it’s not coming back. Customers use and love apps.
Turns out, that businesses like bank branches for a variety of reasons:
Simultaneously, the commercial real estate market has been adapting to new consumer preferences. The demand for unique and experiential retail and dining experiences has been on the rise. Consumers are increasingly seeking out destinations that offer more than just products or services—they want experiences. This demand has opened up opportunities for creative reuse of spaces that were once dedicated to more traditional uses, such as bank branches. Source: https://www.pennflorida.com/the-rise-of-conversions-bank-spaces-becoming-retail-and-restaurant-locations/
Converted Branches & New Opportunities for Bank Growth
So, why, bring up bank branches now?
I’m not going to argue that banks can bring branch banking back to life or that they should ignore either declining foot traffic or real estate costs. I believe that for some FIs, there are at least 5 reasons and opportunities to revisit converted bank branches:
New partnerships that can be the foundation for new customers and services. These new partnerships may also help your FI identify hidden tribes.
Corporate good will and trust in the communities they have been serving.
Increased foot traffic to converted branches. While the branch may not have generated foot traffic to your bank (or another bank), the new retailer or business that takes over the branch will. One place to meet customers and potential customers is on their phones. Another place to meet them is where they go – whether a coffee shop, bar, restaurant or home. This can translate into more and new opportunities for FIs to meet customers and get to know & understand your neighborhood. These interactions can lead not only to new customers but also to more & better consumer and business loans.
Customers seeking new, unique and luxury experiences. Many businesses want to leverage the branch vault and architecture to target customers seeking a luxurious experience. In Philadelphia, a high-end steak house did just that:
Del Frisco's took over the building in 2008, but kept much of the original architectural details, including the vault.
Heading downstairs, you'll see the vault's 3-ton metal door swung open. In the 1920s, this was where the safety deposit boxes were stored. At Del Frisco's it houses a few of the restaurant's private dining rooms, each of which has walls that highlight part of its massive wine collection (around 1,500 different varieties). Among the wine available is Screaming Eagle, a favorite of wine connoisseurs that can sell for upwards of $3,000 a bottle. Source PennLive Luxurious steak house used to be a Philadelphia bank: Cool Spaces
Finally, the 5th opportunity is one that benefits financial institutions perhaps most of all……
Economic Revitalization
One reason that business owners are attracted to former bank branches is the opportunity to improve the economic viability of an area. A blog post on a commercial real estate developer’s website nailed the key reason for converting a bank branch:
Economic Revitalization: Converting vacant bank spaces into thriving businesses can contribute to the economic revitalization of urban areas, attracting more visitors and increasing local revenue. Source: PennFlorida
I wrote about the economic impact of the loss of bank branches on small businesses, individuals and communities.
Improving access to credit is not simply putting in more branches – at post offices or otherwise. The critical component of a physical bank branch that affects access to credit for those who need it is “soft information” – that is, the personal knowledge that branch managers have of small businesses, the business owners, the neighborhood and local economic conditions.
and here:
The loss of bank branches has a ripple effect: Consumers and small businesses lose access to credit. Without credit, they can’t buy homes or maintain (or expand) their businesses. The loss of a bank branch sends a signal to the larger community that a neighborhood or town or region is not economically viable. As this happens, property loses value and is abandoned. Maybe crime increases and predatory lenders move in to provide the credit residents
One Philadelphia brewery/restaurant in a converted branch plans to take economic vitalization to another level. This conversion plants to create different atmospheres to target different types of customers:
The first floor, which will be at Main Street level, will hold the brewing operations as well as what Petracca calls a "high-end hotel lounge cafe." It will open early in the mornings to serve coffee and function as a workspace. Later in the afternoon, the menu will hold tapas and small plates, and alcohol will be served. Source: Philly Voice: Source Brewing to Open Four-Story Manayunk Location in 19th Century Bank
The first floor pivots from a coffee/workspace during the morning and early afternoon to a tapas/bar in the afternoon. Another floor will be designed from interior to food to attract families with kids
Once Upon A Time is Not Today
Once upon a time, people traveled to the town square and that was where the bank branch was. In addition to their other errands and business in the town square, people went to the branch, to deposit and withdraw money, apply for a loan. The branch manager met and talked to all the customers and business owners.
This model is gone. New models have emerged. Digital of course. Converted branches are and will drive new and more foot traffic, more businesses to their neighborhoods. More people seek to live in the reviving neighborhood. These businesses and customers will also be people and organizations who need credit, SMB banking, etc. Your FI might miss some of these prospective customers through digital marketing.
Will FIs be where the customers are?
Partnering with a business in a converted bank branch is not a slam dunk. Any presence requires FIs to answer many questions before moving forward:
Does your FI fit into this new business or group of businesses? What are the synergies? What value can your FI add?
Can you adapt your products and services and organization to this type of “branch”?
What products and services will meet the needs of the people and businesses who own that converted branch and go there for dinner or shop?
Because a converted branch that is now a luxury apartment building or wildly popular tapas bar, doesn’t mean a financial institution should hang on to branch real estate. It also doesn’t mean a financial institution that doesn’t own real estate should abandon branches as a way to meet customers where they are.
Takeaways
View branches from a new perspective – not as an expense but as a revenue generator. It’s time to view converted bank branches as a new place to meet customers where they are, where they live or go to eat dinner.
There is no template or formula for how to reimagine how to create a relationship with a converted branch business entity. Specifically, I am not advocating that FIs roll-out a single strategy across all converted branches in a city, region or state.
Keep the option open that this might be the wrong idea for your FI.
Confirm that your FI has the risk appetite to pursue this possibility even if it does not work at all. Innovation, whether completely digital or not, comes with risk.
Re-imagine the value you can take from a presence in a converted bank branch. If your bank branch is valuable enough to attract breweries, restaurants, cafes and other businesses that want a unique space, what value can you gain from a re-imagined presence in a converted bank branch? What value can you provide the business or their customers?
Align your partnerships with entities that will help you target hidden tribes of customers for your FI.
Start small. Approaching branch banking in this way demands that your FI take care to pick partners, businesses, locations with specific goals. Some of those goals might include:
Provide credit to encourage SMB investment and consumer mortgages in this neighborhood.
Increase your physical presence or marketing reach.
Test new products or services.
Some other goal
With specific goals in hand, your FI may come up with a plan to achieve them that does not start with any banking services.
Pair this approach with new products and services. For example, if you partner with a fintech like Plenty or Debbie, consider a partnership with a restaurant or other business that caters to high tech employees or young families.
Who writes PivotAssets?
I’m an independent analyst, strategic advisor & consultant (& a former Gartner analyst). I’ve worked in and covered the banking industry for over 2 decades.
My aim is not to confirm what you know (and you are plenty smart!) but to challenge you & give you a fresh perspective & analysis on the transformation that is —and isn’t happening - in the industry.
How can I help you?
Want more insights and analysis on small innovations, ghosting customers, hidden tribes and leveraging your bank’s legacy? Need help positioning your digital banking solution or fintech to meet the demands of today’s banking environment? I have my own firm PivotAssets.
To collaborate with me: I can analyze your GTM strategy or sales or VC presentation, help you prepare for your first vendor briefing or your first funding pitch meeting. I also write piece of thought leadership relevant to your business, solutions or technology. I also organize and moderate webinars series, podcast or panel.
Contact me at stessa@pivotassets.co or via LinkedIn.
I’m also available for inquiry and strategy sessions via Third Eye Advisory.
Me, Elsewhere
Did you miss the last Fintech Book Club? We discussed Ronit Ghose’s Future Money. Listen here
I’m an expert advisor at Third Eye Advisory.
Theodora Lau, Barb Maclean, Efi Pylarinou and collaborated on this unorthodox, diverse perspectives about financial services & the year to come.
I spoke with Theodora Lau and Barb Maclean on their podcast One Vision about smart banking & hidden tribes.
I moderated a great panel of folks for a conversation on innovation. We cut through the hype and share practical advice for making your digital transformation efforts pay off. We definitely talked about the importance of small innovations.