Inside JPMorgan’s big contrarian bet on brick-and-mortar bank branches (JPM)

JPMorgan has, of course, culled some branches over the years, but far fewer than its peers — just 484, or 8.6%, since 2012, compared with more than 30% cut by its competitors Citigroup and Capital One over the same period.

The aspiration for branch expansion isn’t entirely new, either. It has been on CEO Jamie Dimon’s wish list for more than a decade, but, like so many other well-laid plans, the financial crisis derailed that.

“Back before the crisis he had made it clear that he wanted to be in some new markets,” said Nancy Bush, an independent bank analyst who has been covering the sector since the 1980s. “That kind of all got put aside as we recovered from the crisis.”

The bank has long zigged when others have zagged under Dimon’s leadership, but the firm nonetheless expects the investment in branches to help its bottom line — a belief seemingly divergent from conventional wisdom in the banking industry, which is largely preoccupied with handling the customer migration to digital and mobile platforms, especially by millennials.

“He’s always an opportunist,” Bush said. “That’s just the way he’s been. When everybody is retreating, he’s going to be expanding.”

But though he holds the final word, Dimon won’t be the one captaining the new initiative on the day-to-day basis.

JPMorgan has tapped its millennial-whisperer for the task of managing branches, including the expansion. Pam Codispoti was named the head of branches at JPMorgan back in October, departing from her post as the president of Chase Branded Cards.

Codispoti, who spent nearly 12 years in credit cards at American Express before joining JPMorgan in 2014, made a splash by masterminding the now-legendary Chase Sapphire Reserve credit card and, in the process, dispelling the myth that millennials weren’t interested in premium cards that carried a fee.

According to Bush, Codispoti faces an elemental challenge in overhauling the bank feature that used to be ground zero for selling product: How do you make these things work?

“You’re trying to establish this middle ground between digital and human,” Bush said. “How do you establish that middle ground where you do things in a branch and make it profitable?”

Codispoti is game for the challenge: “There is a myth out there that branch banking is dead, that branches are going away,” she recently told Business Insider. “I just don’t believe that to be true.”

She’ll be pulling moves from her Sapphire Reserve playbook in hopes of proving the naysayers wrong once again. One of the most important things she learned from that experience was the value of getting in front of your target customers early and designing a product with their input from the get-go.

“We took some calculated risks to do things differently than we’d ever done before,” Codispoti said. “We launched Sapphire Reserve without any initial marketing. And we allowed our design target — which were savvy millennial travelers who rely on social — we kind of brought our product to them and allowed them to market our product. Those principles of design-led thinking, customer first, getting into the homes of people, doing ethnographic research approach, and that agile methodology are things we will use as we try new things in our banking environment.”

Making branches appealing to that Sapphire Reserve demographic — savvy millennials — will be crucial to JPMorgan’s branch success.

As Bush notes, young earners in their 20s and 30s just don’t need a physical branch for most of their routine banking anymore — mobile and digital options and ATMs suffice for moving money around, paying bills, and opening accounts.

“The generation of mine and the generation before me, we still have a need for branches,” Bush said. “Our kids and grandkids do not.”

Codispoti allows that millennials want something different out of branches than their forebears, but she doesn’t think they want out of the proposition altogether, noting that the demographic still visits a Chase branch three times a quarter.

“They really would like to come to the branch for experiences and advice more so than everyday transactions, which I think they feel very comfortable doing on their own from mobile or digital tools,” Codispoti said. “We have a long pipeline of innovations that are targeted to millennials, millennial-minded customers who really want to bank on their terms, wherever, whenever, and however they choose.”

One of those innovations, the Everyday Express branch, launches in limited release this week. The locations are smaller than a typical branch and feature more digital tools, including the company’s eATMs.

They’ll also offer advice services in the style of Apple’s Genius Bars to help bridge that human-digital divide that Bush mentioned.

The first six Everyday Express locations open Monday in Culver City, California, and in Queens, New York.