After the novel coronavirus forced banks to close their branch lobbies, Pittsburgh-based F.N.B. Corp. added an online tool allowing customers to make in-branch appointments with a banker for the first time. The customer response was swift and unexpected: The bank went from 21 appointments in January to more than 2,700 during April, according to CEO Vincent Delie.

F.N.B.'s experience is emblematic of how the pandemic is forcing consumers to rethink many behaviors — including the way they use physical bank branches. In the age of social distancing, even customers who long relied on their local branch are turning to digital options. And that is opening the door for banks to rethink their branch footprints.

"Every generation wants convenience," said Mike Carter, executive vice president of advisory firm Strategic Resource Management. "What has happened now, people who didn't understand how convenient digital banking is, they got a taste of it."

Experts and bankers say physical locations will continue playing an important role in bank strategies, but the pandemic will change the way branches look and operate for good.

"In the future, the bank branch will be a lot like going to the dentist or seeing a doctor — you'll make an appointment to go in and discuss something," Carter said in an interview.

Reimagining the brick-and-mortar branch

Digital banking allows financial institutions to focus their branch activity more on value-add services — think financial planning or applying for a loan — and less on transactional activities, like depositing checks or transferring money, experts and bankers said.

"When people start thinking about the future of banking there will be some consideration to the format and activities and how do I use the branch as an extension of digital rather than digital as an extension of the branch," Tiffani Montez, a retail banking senior analyst at advisory firm Aite Group, said in an interview.

Many big regional banks with significant branch networks agree, especially as COVID-19 changes consumer behavior.

"Digital can do some of the heavy-lifting around simple servicing transactions," said Jamie Warder, executive vice president and head of digital banking of KeyCorp, a big regional bank based in Cleveland with a large branch footprint.

F.N.B., the Pittsburgh bank, began redesigning its branches a few years ago to focus more on consultations and less on transactions. About 15% of F.N.B.'s branches now have a technology-driven design with kiosks where customers can scan QR codes to watch videos about products the bank offers, and less teller space. Recent consumer behavior changes are accelerating the bank's plan to convert more of its branches to this prototype, Delie said.

"Our concept of creating a more interactive branch came from our view that traditional transaction volume would shift to digital channels so we would invest in digital channels to take advantage of that and gain efficiencies," Delie said. "But the environmental conditions that occurred really accelerated our thesis. We said 'Hey, this is going to happen over a long period of time' but it happened immediately."

Shuttering branches

The pandemic could also accelerate the ongoing trend of branch closures, experts say.

The number of U.S. bank branch closures declined in the first half of 2020 compared to the first half of 2019, according to S&P Global Market Intelligence data. The numbers do not include temporary bank closures, such as those caused by the COVID-19 pandemic. But up to 30% of branches that were closed due to COVID-19 may never reopen, according to an estimate that Rob Aulebach, a former retail distribution executive with Bank of America Corp., provided during a conference call with UBS Securities analysts.

Charles McQueen said several financial institution clients have retained his advisory firm to examine their branch footprints since the pandemic hit. He said banks are considering closing branches, reducing hours or decreasing staff.

Closing branches is also a way to preserve capital during the tough operating environment. "If I can close branches and cut my operating costs, that is going to improve earnings and grow capital," McQueen said.

Some large banks are doing just that. In a presentation in June, U.S. Bancorp CEO Andrew Cecere said the bank could target closing more branches than previously estimated due to changing consumer behaviors. In 2019, the bank had planned to close 10% to 15% of its branches. U.S. Bancorp closed a net 69 branches in the first half of the year, more than almost any other bank in the U.S. And Wells Fargo & Co. executives said July 14 that the bank will take steps like eliminating duplicative facilities to cut costs.

But for smaller lenders, closing branches is often not an option.

"If a community bank or credit union only has one to five branches, the impact of shuttering any one of those branches would carry with it massive implications for perception of presence and value in that community," said Lee Wetherington, director of strategic insight for Jack Henry & Associates, a company that provides technology solutions to financial institutions.

Whether banks redesign their branches or shrink their branch footprints, the pandemic will have a lasting impact on the banking industry, according to McQueen.

"People have changed how they shop and I think it's a permanent change," McQueen said. "It's not only how I shop for groceries or clothes, there's a permanent modification and banking is going to be a part of that."