Feel like a latte with your loan? A Capital One branch is hoping that a new initiative, in which cafes will be located inside bank branches, will pay off for them.
As a result of a huge shift in the banking industry due to the prevalence of online and mobile banking, banks are finding it harder and harder to get customers to come into their branches.
The problem is, the banks need their customers to come into their branches for money-making products like credit cards and loans, while also filling the needs of Americans who come in regularly still in order to make deposits or withdraw cash.
Capital One’s new cafe format is set to debut in Boston later this year. Although there are no tellers, there are employees who can answer questions about the bank’s services, and direct customers to the company website. In addition, customers will be able to buy gourmet coffee and enjoy free Wi-Fi.
The cafe format is being piloted by Capital One at various locations around the country, including a few others in Boston. Although unconventional, the cafe-slash-banks may prove profitable. Not only do coffee shops have a 7% annual growth rate, but they are a way for the bank to promote their brand without employing that many tellers.
Other banks are following suit with new programs in order to employ fewer tellers. For example, Bank of America is investing in high-tech ATMs. U.S. banks operated 94,725 branches last year, the lowest number since 2005, according to the Federal Deposit Insurance Corp.
Despite cost-cutting measures, many branches remain unprofitable, says consulting firm Simon-Kucher and Partners. But converting branches into sales centers will be no easy task. In some cases, the changes risk turning off customers.
Grace Raymond was frustrated after she stopped by a Bank of America in Ocala, FL, to pay off her mortgage and encountered a “lobby full of customers” and no one to help clarify whether she needed to go to a financial adviser or a teller. After a long wait for a financial adviser, Ms. Raymond learned that she could have just gone to a teller, she said.
“One thing we hear from customers: ’If you change the inside, fine. But don’t mess up the drive-through,’” said Todd Barnhart, head of retail distribution at PNC. Banks are treading carefully while also trying out new ways to become efficient.