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Don't Worry Too Much about the Decline of the Bank Branch

Adam Rust's picture

Posted March 10, 2015

It wasn't too long ago that the hot idea in banks was to offer a better branch experience. Commerce Bank (New Jersey) was pioneering a friendly bank environment that featured comfortable couches, inviting color schemes, and open doors for eighty business hours per week.

Fast forward to today, and bank branches are out of favor. In a February presentation to investors, JPMorgan Chase CEO Jamie Dimon said that the bank will close approximately 300 branches in the next two years. Bank of America says that it has no choice but to embark on a massive branch diet. Business owners in some rural communities are organizing to protest when their only branch closes. 

I go to a bank branch when I have to deposit a money order or to get a cashier's check. On the occasions when I want cash, I drive through at an ATM. Otherwise, I try to avoid doing so. Branches do a great job of helping with, too. Think how much less time it takes to wait for a drive-through ATM compared to what it takes to get a burger and fries. It used to be that deposits at ATMs allowed me to avoid a branch visit. Now, remote deposit means that I don't even have to use the parking lot at my local bank. 

Who is Doing the Closing?

Until now, Chase has been the exception to the idea that banks are moving away from the branch model. In fact, Chase actually increased its branch footprint in the last five years. 

On the opposite hand, no one seems as intent as Bank of America when it comes to moving away from brick-and-mortar.  In just five years, they have closed one of every six branches. 

Branch Closings Big Banks 2010 2014

The regional banks appear to be more comfortable with keeping branches intact. Until last year, branch count at PNC/RBC was roughly the same as back in 2010. USBank has actually increased their numbers.

In spite of the fact that there are fewer branches, every one of these banks is enjoying a general increase in deposits.  Combined deposits at the six largest retail banks (B of A, Wells, Chase, USBank, PNC, and Citi) increased 44 percent between June 2010 and June 2014. On a per branch basis, sums of deposits increased 58 percent. 

Chill out! Relax! Chillax!

I think the concern that a lot of folks have about reduction in branch networks is misplaced. There are still plenty of branches. Some would argue that branches mean more to the groups that are traditionally under-served, but that assertion seems to go against intuition. After all, if bank branch footprints are going to shrink, wouldn't those most impacted be the ones who are served by branches? Ultimately, people still need to have a place to go for some services, but we have to acknowledge that smart phones will suffice as near-equivalent replacements. Research says that the underbanked are unlikely to be under-phoned. Moreover, we know that the age of the underbanked is skews to a younger median, it is likely to be the case that the underbanked are over-phoned relative to their fully-banked peers.