Fifth Third tests concept of ‘microbranches'

Small banks offer self-service, no tellers


DAYTON — How is the bank branch still relevant? That was the question Tayfun Tuzun, chief financial officer of the Dayton region’s largest bank, Fifth Third Bancorp, posed to investors at an industry conference this month.

Mr. Tuzun was discussing the rapidly changing technological environment in banking, and changing consumer behavior at the 2013 Goldman Sachs U.S. Financial Services Conference in New York City.

Bank branches are still relevant as Fifth Third’s most visible presence in communities, Mr. Tuzun said. Branches are a key source of deposits, and for cross-selling other bank products such as loans. Branch locations and convenience continue to be top factors to customers in selecting a bank, Mr. Tuzun added.

However, Mr. Tuzun noted that Fifth Third believes 70 percent of transactions including deposits, withdrawals, and transfers conducted by its branch tellers in 2012 could have been completed by customers using self-service technologies. Self-service methods include mobile applications, online banking, and ATM transactions.

Customers depositing money in their accounts using a form of self-service technology has grown to account for 25 percent of Fifth Third’s deposit volumes, Mr. Tuzun told investors. Some of the rising electronic deposit activity comes from Fifth Third’s remote deposit capture mobile application, introduced in late 2012.

“The cost of processing self-service transactions is a very low fraction of the cost for a teller to perform the same transaction,” he said.

Fifth Third is testing its first “microbranch” in downtown Cincinnati that’s about half the size of its traditional office and does away with teller lines and cash drawers.

Over time, about a third of Fifth Third’s current 1,326 branches could fit this new self-service format, and plans are to roll out more of these microbranches in 2014. Smaller branches outfitted with self-service technologies would be located close to other full-service locations and share a branch manager, Mr. Tuzun said.

“It’s something akin to a hub-and-spoke system,” he said.

“We intend to be thoughtful, when contemplating the future of our branches, and we expect to strike the right balance between customer convenience and how to efficiently manage declining teller transactions. I’m not convinced that simply closing branches is the right course of actions to address this change,” he said.

Fifth Third has 14 branches in metro Toledo, along with numerous automated teller machines.