Bank of Montreal looks to open small bank branches as more customers bank online

MONTREAL – The Bank of Montreal will open tiny branches with a handful of employees giving “face-to-face” information on topics such as mortgages with most customers now banking online.

BMO is opening what it calls a “studio” branch next week in a Montreal condo building and expects to open 10 to 15 of these micro branches at a time across Canada and in the U.S. Midwest, CEO William Downe said Monday.

“So many of our customers now do 99 per cent of their transactions online using mobile devices,” Downe said after a speech to the Canadian Club.

“But when they want to sit down and talk to someone, they want to do it in a convenient location,” he said.

The 900-square foot location on Montreal’s Nun’s Island will have just four employees and is integrated into the condo development.

Retail banking has been a profitable mainstay for the Canadian banks, but the sector is expected to face headwinds as people borrow less.

In response, the banks have been changing how they do business to meet customers’ lifestyles in an effort to grow their share of the market.

RBC (TSX:RY) has opened branches that it says are more like a retail store than a bank branch. Customers can use technology to explore financial goals or ask for help from staff.

TD Canada Trust (TSX:TD) has mortgage specialists that will meet with customers outside normal banking hours in their homes.

BMO’s mini-branches will be complementary to larger branches in a neighbourhood and could also be in small store fronts, Downe said. The idea is to increase “face-to-face contact,” by having customers come in and talk to the bank employees, he added.

Customers will be able to get mortgages, a financial plan if they’re thinking about retirement and information about saving for their children’s education, he said.

The “studio” branch model was tested in Quebec, Downe said, because Quebecers are considered early adopters of new ideas.

In the United States, the bank operates under the BMO Harris Bank brand.

“Our sense is that they’ll play everywhere in the country and they will play as well in the mid-West as they do in Canada.”

Downe said the bank has to go to where it’s customers live. He said during his speech that it’s reasonable to believe that BMO can add a million new customers every year.

BMO came under fire earlier this year from Finance Minister Jim Flaherty after the bank launched a limited-time offer for a fixed five-year mortgage at 2.99 per cent.

Flaherty called the Bank of Montreal to express his disapproval.

Downe said the intent was to shorten customers’ amortization period to 25 years from 30 years.

“The real question is the quality of the borrower,” he said.

Downe said caution is still needed on the Canadian economy and that the country’s businesses need to compete globally.

“If you can’t compete anywhere in the world, eventually someone will take your business away from you in your home market.”