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PNC building virtual branch

| Tuesday, Aug. 12, 2014, 11:45 p.m.

PNC Bank's top executive said he wants to be the Main Street bank for the virtual world as customers handle more of their transactions online and through mobile devices.

“We need to build in a digital world what used to exist in a branch when you walked in the branch and it could solve your problem,” Bill Demchak, CEO of the region's largest bank, told an audience of 150 during a breakfast hosted by the Pittsburgh Technology Council on Tuesday. “And no bank has done that. Yet that's exactly where the world is going.”

PNC is transforming its retail footprint that spans 17 states and Washington toward a tech-savvy model in which it interacts with customers through screens more often than in-person. The retail transformation is a key focus for the bank as it figures out a way forward following a busy and tumultuous decade for banks.

For most of the past seven years, banks have been in survival mode during a global financial crisis in 2008, the recession and slew of new regulations aimed at preventing another meltdown. Meanwhile, PNC has been in a period of rapid growth, expanding into new markets organically and through acquisitions of Riggs National Corporation in 2005, National City in 2008 and Royal Bank of Canada in the Southeast in 2011, among others. In the 12 years since Demchak arrived at PNC, the bank has grown from an organization with a regional presence and 15,000 employees to a 55,000-person company with a national reach.

Until recently, most of PNC's energy had been spent organizing that expanded presence, but not doing much on technological innovation.

“We came out of the financial crisis and we had an integrated operating platform that was 10 years stale because we basically froze changes for the course of 10 years as we did all the integrations,” Demchak said.

Now, PNC is making up for lost time and trying to figure out how to use technology to serve customers.

Through the first half of this year, nearly half of PNC's customers — 44 percent — handled most of their transactions themselves using ATMs, mobile devices or online, compared with 37 percent for the same period in 2013, according to PNC's latest quarterly report. In response, PNC has closed and consolidated branches — nearly 200 last year and 36 through the first half of 2014 — and rolled out a new branch model that dispenses with tellers in favor of super-charged ATMs. The tellers are being retrained as “universal bankers” who can answer questions, demonstrate technology and help with problems, such as replacing a lost debit card or applying for a loan.

“We basically want to be able to have a retail offering for you however you want to use us,” Demchak said.

PNC has been at the forefront of reshaping retail banking, and has “by far, the most aggressive plan for transforming its branches and footprint,” according to a report this year from Morningstar analyst Dan Werner. PNC's head of branch banking said in June that he expects two-thirds of the roughly 2,700 branches to be converted to the new tech-centric model by 2019. Demchak said Tuesday it could be sooner than that.

The slimmed-down retail operations are about cutting costs as well as meeting customer demands. PNC shaved $32 million from its noninterest expense on retail banking through the first six months of this year, largely through branch closures. But this isn't about penny pinching, Demchak said.

“It's not a cost saving thing,” he said in an interview on Tuesday. “It's how to serve our clients better.”

There is some evidence that customers are happy. PNC jumped three spots in the latest J.D. Power customer-satisfaction rankings released in May, which showed general improvement among big banks that had invested in mobile technology.

Still, while the branch concept and technology is changing, PNC is trying not to get ahead of itself or change the fundamental “Main Street” approach, Demchak said.

“We're not going to be a large international player. We're not going to enter the capital markets. We basically take our model … ideally on this great new platform that we're building, technology backbone and expand market by market,” he said. “It's that simple. No heroics.”

Chris Fleisher is a staff writer for Trib Total Media. He can be reached at 412-320-7854 or

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