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Wells Fargo rethinks retail, plans to shutter 450 branches

Wells Fargo has perhaps the largest branch and ATM network of any bank in the U.S., but it’s finally catching up to its peers, who are closing redundant branches, reinvesting in more modern ones and upgrading ATMs as customers embrace digital channels more and more.

While it’s focused on reducing expenses and improving efficiency, it’s still investing in things that make managing finances easier for commercial and consumer customers, Tim Sloan, CEO, said on an earnings call Monday,. In the second quarter Wells introduced Zelle, legacy banks’ peer-to-peer payments answer to Venmo, and began piloting a chatbot for Facebook Messenger. It also upgraded its mobile checking account opening experiences, launched a service for commercial card customers that lets them upload and manage receipts on their mobile device and automated the accounts receivable functions for Treasury Management customers.

“We are focused on improving the operating performance of the company by increasing our emphasis on core banking products and services that we believe are most relevant for our customers and provide the best financial returns for our shareholders,” Sloan said.

It’s also been rethinking its ATM and branch strategies. Wells was the first major bank to bring cardless cash withdrawals at the ATM last year, followed by Bank of America and Chase, and the first to install the feature in all of its ATMs by the end of the first quarter this year, Sloan said, touting that customers had used the feature more than a million times as of last week.

While Wells Fargo has shut down 93 branches this year (54 in the second quarter alone) to eliminate overlap and improve performance of the network, and plans to close about 450 total by the end of 2018, it also plans to increase “infrastructure and platforms available on-demand for self service” — a.k.a, ATMs — from 85 to 845, according to its second quarter earnings supplement.

The bank’s branch total stands at 5,977 as of the end of the second quarter, compared to 6,028 branches in quarter one and 6,111 branches in the second quarter of last year. Wells expects branch closure and “optimization” to save it about $170 million in expenses by the end of 2018.

Wells has been less aggressive than its peers when it comes to branch closures. It closed just 98 branches between 2012 and 2016, according to the FDIC, a 1.6 percent decline compared to Chase (3.4 percent), Bank of America (16 percent) and Citi (28.5 percent).

“The branch interactions are reflective of what’s going on in terms of customer choice moving more to mobile than anything else,” Sloan said. “When you think about our customer interactions… look [not only] at branch interactions, but also look at the number of online and mobile interactions.”

Wells reported 379.9 million customer interactions through ATMs and branches in the second quarter, a three percent decline from 393.3 million in the same period last year. The bank says the change reflects continued customer migration to virtual channels and increasing digital adoption. Interactions through online and mobile channels totaled 1.4 billion in the second quarter of 2017, up five percent from 1.3 billion in the second quarter of 2016.

“It’s important…to make sure that we’re investing in technologies. So a customer can open account on their mobile device set. And if they want to they can come into one of our branches, that’s fine.”

“We’re seeing a slow, but steady return in an improvement in underlying retail business,” Sloan said. “We still have more work to do.”

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More than a cash dispenser: How banks are rethinking the ATM

Arguably no banking technology in the last 50 years has been as disruptive as the ATM machine, celebrating its birthday Tuesday.

Banking may look different on the surface, but its core functions look the same. Growth of mobile banking usage is slowing, mobile payments haven’t really taken off, and banks are re-investing in their branches as an important and evolving channel for their evolving customers. Like branches, ATMs are an important point of contact for banks and their customers that aren’t getting phased out because some people are becoming more digital — they’re getting upgrades. Banks want sleeker machines with larger screens and the functionality to perform as an automated teller that does more than dispense cash and take deposits.

“The activities you can do on ATMs and mobile are very similar for those who are super mobile users with super high expectations of how an ATM should behave,” said Jose Resendiz, general manager for global financial services at ATM producer NCR. “For those who are not, it’s the perfect training ground for a financial institution to get their customers comfortable with how they’re interacting and engaging.”

According to PwC, customers are leapfrogging banks’ omnichannel banking strategies and seeing more all-digital users. However, banks are still re-investing in their human interaction channels. TD Bank just employed voice recognition technology for its call centers to help emulate the retail experience in that channel and banks across the U.S. are upgrading their branches. Wells Fargo, Bank of America and Chase are also upgrading their ATMs.

“The ATM isn’t going away any place yet, it is continuing to grow,” said Kevin Tynan, svp for marketing at Liberty Bank for Savings in Chicago. “The movement is for ATMs to become more convenient. Customers have higher expectations than they did 20 years ago when they just went to an ATM for cash. Now they’re looking to do more transactions and they want it more secure.”

This month Bank of America introduced “Extreme ATMs” or “XTMs.” These 32-inch monitors act as marketing vehicles to display ads and targeted offers to customers, as well as video tutorials to teach people about online banking and to find time with a personal banker. It plans to roll out 100 this year and another 1,000 in the next couple of years.

Bank of America is upgrading its whole ATM network with new technology and giving customers greater choice of transaction type, including check cashing, making credit card payments and choosing their preferred denominations when withdrawing cash. It was also the first to deploy cardless ATM capability last year.

“We’re really committed to the integration of digital and physical channels to provide our clients with a seamless experience across all channels, including our financial center and ATM network, as well as our mobile and online banking platforms,” said a spokeswoman for the bank.

Wells Fargo began introducing cardless machines this spring. Last year Chase deployed 5,000 “eATMs” across the U.S. that give a similar tablet-like experience, also with cardless capability. This year, it’s focused on migrating transactions that happen through teller to digital, Thasunda Duckett, JPMorgan Chase’s consumer banking CEO, said at the company’s Investor Day in February.

Last year, more than 400 million transactions were completed through tellers, 70 percent of which could have been done through a digital channel — online, mobile or ATM — Duckett said. Resendiz put that number at 80 percent, and suggested video-assisted ATMs could be something that motivates customers to visit their branches.

“The challenge — and opportunity — is to make that customer connection across the channels,” Resendiz said. “Cash will still be around quite a while, people will still be able to go to physical channels, but more and more, people continue to adopt digital payment methods and experiences.”