How long has it been since you physically went inside your bank branch? How many times, however, have you used the drive through or the ATM machine at a conveniently located branch of your bank?
Bank branch openings increased significantly, according to the FDIC, to nearly 70,000 branches in 2004 (almost doubling in number over a 20-year period). According to data collected by the FDIC in 2004, while the number of commercial banks was declining, the number of branches each bank had significantly increased. Part of this change was due to more relaxed regulations, but it was also found that efficiently run branches contributed significantly to the profitability of the bank.
The question, of course, is whether or not that trend will continue into the next couple of decades. The credit crunch of 2009 resulted in several major banks, including Providian, Wachovia, and Washington Mutual, being swallowed up into other banking giants like Wells Fargo and Chase. In July 2009, Bank of America announced plans to close several branches, reducing their number of branches by up to ten per cent.
In many ways, it seems counterintuitive that branch banking would continue to rise in popularity as online banking, internet bill paying, and online merchant services seem to have exploded, but was the 10% reduction in Bank of America branches the start of a new downward trend? According to industry analysts, the economic downturn and credit crisis of 2009 sent the banking world into a bit of a tailspin, and over the next decade, consumers should expect to see fewer branches.
Banks, reeling from losses in foreclosures and loan defaults at the end of the decade, are continuing to look for ways to reduce costs and consolidate services, and with the average bank branch costing $2 million to open and $300,000-$400,000 to operate each year, they are a prime target.
The big question is whether or not consumers will be affected by the ongoing closures. While it might be inconvenient not to have a bank branch on every corner in your town, the savings realized by the banks may help ease lending restrictions over the long term. Consolidations of services can also provide better service levels with standardization.
As well, as technological advances provide secure options for online banking options, more and more people will not have to go any further than their home computer to pay bills, check bank balances, transfer funds, and make banking decisions. The days of needing to go into your branch office to sign paperwork or meet with a bank manager has been replaced with online secure forms submissions and electronic signatures. Cashed checks are rare compared to direct deposits and electronic funds transfers.
Branch banks will still have their purpose - they are the personal face on the impersonal commercial bank, attracting new customers and introducing communities to their bank's services. Branch banks will continue to serve a purpose, but the industry simply has to be more efficient and economical, meaing there will most likely be less branches around to do it.