Capital One Cafe plies you with coffee and pastry while selling you services

Imagine entering a spacious room with tables and chairs and being served coffee or pastry while an "ambassador" greets you to discuss your finances.

This place isn't a restaurant or Starbucks — though it has elements of both.

Capital One, the bank behind the cafe concept, describes it as a place where people can recharge their mobile devices and perhaps their understanding of finance.

The cafe even has couches and nooks if you prefer more private time with a spiffily dressed ambassador, who can coach you on setting up an account, paying bills online, and applying for a credit card.

This is what retail banking in the 21st century will look like as Capital One Cafe's new space in Center City debuts this spring on two levels of the old Latham Hotel at 135 S. 17th St. in Rittenhouse Square.

Because banks no longer have the traffic (hence the recent announcement by Wells Fargo to shut 400 branches), Capital One Cafe's vision is to get new customers in the door with reconfigured spaces that are just as important as the bank's other offerings (free WiFi, cash deposit ATMs, demo bars to learn digital tools).

"It's really about empowering people to feel confident about their relationship with their money," said Lia Dean, senior vice president for Capital One Cafes.

Besides the Rittenhouse cafe, there are 15 Capital One Cafes in seven cities: Boston; Chicago; Denver; Los Angeles; Richmond, Va.; San Francisco; and St. Cloud, Minn.  There are plans to open cafes in Seattle, Austin, and South Florida this year.

Though she declined to disclose costs of the cafe redesigns or whether the bank has increased memberships and traffic at the respective branches,  Dean did say, "The fact we are continuing to open them across several markets is a testament to how they've been received."

Online is finally reshaping banks, experts say.

"What's happening in banking is a lot like what happened in retail over the last decade," said James Sinegal, banking industry analyst at Morningstar Research Services LLC. "Online shopping started in the 1990s, but it's only recently that Amazon has really started to wipe out brick-and-mortar retail. We're seeing the same thing happen to bank branches now."

Remote deposits and the decline of cash have also cut the need to visit branches, he said.

Capital One's first Philadelphia cafe opened in 2001 at 1636 Walnut St. with 1,950 square feet on the ground level,  nowhere near the scope of what will replace it.  The new Philadelphia location across the street will be more than triple that size. Its 6,636 square feet will be spread over two floors (ground level and mezzanine) with two meeting rooms, two nooks, four ATMs, and a patio.

"Our spaces tend to serve as community hubs that bring people together," Dean said. Its bakery partners  include Philadelphia Bakery Merchants, High Point Cafe, York Street Market, and Bakeshop on 20th. There's a charge for the pastries, and Capital One card customers get 50 percent off coffee and tea.

Michael Gorman, senior vice president at Metro Commercial, who represented Capital One in the transaction with landlord Pearl Properties, said retailers and banks can no longer embrace the status quo. "It's not an option, or they'll be left behind," said Gorman.

Downsizing in the banking industry has long been a trend. Bank of America, which had more than 6,100 branches before the financial crisis in 2008, had  4,579 branches in 2016, according to SNL Financial Data. JPMorgan Chase & Co.'s branch count actually peaked in 2013 at 5,630 before declining over the last three years to 5,258 last year.

Similarly, PNC Financial Services Group, Inc. went from 5,151 branches in 2013 to 4,579 branches last year.

"The big question is how fast the decline progresses from here," analyst Sinegal said. "You don't see many banks making outsized bets.  They are generally cutting branches at fairly similar rates.

"In theory, this should be good for banks," he said. "If their customers are happy online, the banks can spend a lot less staffing and maintaining expensive branch networks."

But Sinegal cautioned that a lot of sales activity still occurs in the branches, so they would like to keep people coming in, and one way to do that is through the cafe concept.

The downside?

It's easier to upsell a pastry to a Starbucks customer than an IRA, Sinegal said. "Also, you've now put your bank into competition with coffee shops."

Dean says she believes that her company is heading in the right direction.

She said the redesigned Capital One Cafe space in downtown Philly is a prototype. Capital One envisions "chance encounters" or a "millennial collision" where someone age 19-34 meets another millennial and strikes up a conversation, which could lead to both becoming loyal Capital One customers.

Top locations are key, said Gorman, who brokered the deal. Although there is some flexibility in neighborhoods, he said, "they want A-plus retail locations in dense urban cores with a high volume of pedestrian traffic. The location at 17th and Walnut certainly checks all those boxes."

The cafe concept isn't new. It's a natural evolution of the concept that has been part of Capital One 360 (previously ING Direct) since it launched in 2001.

Capital One staff members are even hitting the road this winter and spring as the company's "Banking Reimagined Tour" –  a hands-on digital experience designed to introduce people to Capital One's redesigned banking through services and programs.

The centerpiece is a state-of-the-art, 54-foot trailer offering an interactive banking service, called Money Coaching, modeled after what the new cafes will be rolling out this year.

The tour will hit Philadelphia on April 1-2.