In a world where everything has transitioned to be modern, fast, and efficient, more and more banks are downsizing their branch networks, raising the question: do bank branches still matter?
Bank branches are closing and opening
In 2013, there were 3,000 more branch openings, despite a decline in 2010 through 2012, according to FDIC statistics.
Further analysis shows that the statistics supporting the theory of bank demise are to an extent, skewed. “The net number of credit union branches declined last year, but the decline was almost entirely attributed to the absorption of small, mostly single-branch credit unions by larger institutions,” says founder of Bancography, Steven Reider.
According to Reider, branch closures have largely been a result of sizable branch-closure efforts by a specific few financial institutions, including Bank of America SunTrust, PNC, HSBC and Capital One.
Re-focusing the issue
There are a few trends that don’t necessarily point to branches throwing in the towel.
Banks such as JPMorgan Chase, U.S. Bank, Wells Fargo and Woodforest Bank have begun adding more branches, in an opposing strategy to their competitors, with Chase opening over 100 branches last year. While many experts continue to speculate on branch closures, the founder of Bancography says that more significant than branching trends, are the declining counts of institutions.
More than 6,900 banks and savings institutions closed as of June 2013, a decline of over 1,000 institutions from 2009. Credit unions also declined by 550 as of June 2013.
In regards to the branch closures in years past, according to Reider, bank branch changes have occurred largely due to bank mergers and institution failures, a significant piece of context many experts have failed to include in their speculation.
The Internet has the advantage
With the advent of online banking, financial experts expect customers to shift their banking services entirely online. Why?
Online banking provides a variety of features that physical banks aren’t usually able to offer, and many argue that the brick and mortar branches offer nothing unique to counteract this.
“For everyday banking needs, the physical branch is no longer relevant for most consumers. Assuming your bank offers the modern array of technology tools, such as online banking and bill pay, remote deposit, and free ACH transfers to and from the bank, there is little need to step foot in a branch,” says Jonathan K. Duong, a CFA/CFP and president of Wealth Engineers.
“Likewise, if your bank rebates ATM fees, you are free to withdraw money at any ATM in the country, regardless of which bank owns it. You never have to hunt for your bank’s branch or ATM in order to access your cash.”
In addition to those arguments, banks that don’t have physical branches are typically able to offer superior rates as a result. Duong says customers often earn 10 to 20 percent more on their savings, and borrow at lower interest rates. (Continued on page 2)