A case for the bank branch

Editor’s note: This column was included in the April 11 version of The Pulse, a weekly BankBeat email newsletter sent to subscribers.

Community bankers have been hearing for years about the decline of branch banking and the need to shift more services to digital. However, statistics reveal this generally accepted truth doesn’t capture the full picture. Branches — especially if properly used and balanced with a strong digital banking offering — still provide a significant source of growth for community banks.

Though the percentage of online account openings has more than doubled since 2012, the vast majority of accounts are still opened in-person, noted Haberfeld Executive Vice President Robb Rempel in our April magazine cover story on bank architecture trends. The share of online account openings increased to 10.90 percent in 2022 from 9.89 percent in 2021, before falling to 10.10 percent last year. Despite the rising percentage of online account openings, those statistics indicate 90 percent of accounts are still being opened in branches. 

Upper Midwest-based banks are proving the viability of branch banking, albeit with smaller footprints than before. In 2021, Bravera Bank opened a 47,200-square-foot, three-floor administrative building with a retail lobby in Dickinson, N.D. The building includes teller pods near its two main entrances. The inside of the building is flooded with natural light and provides a connection with customer-facing areas on the second floor. 

The new space allows bankers, wealth managers and insurance staff to interact with each other on the second floor, something they lacked before. The third floor includes extensive administrative space. Bravera CEO Dave Ehlis said having the staff together has helped the bank grow through cross-referrals. 

Banks reducing their square footage while remaining in the same building can establish spaces for local businesses and the community to gather while bringing in complementary services such as insurance agents or financial advisers. The branch also provides an opportunity for banks to educate customers about their offerings — a poster on a wall highlighting a new home equity product, or a television screen showing stories of branch staff serving as community volunteers.

Community banks still face rising pressure to improve digital offerings to become more competitive against larger financial institutions with seemingly unlimited technology budgets. Checking balances are 75 percent lower when opened online rather than in a branch, Rempel noted. Overdrafts/NSFs are 171 percent more frequent; and account attrition is three times higher. 

As community banks improve digital banking options, they must remember the importance of branch banking to their relationship-first model. Business customers and consumers still desire the in-person comfort provided by local bankers, and the branch remains a mainstay in many small communities. Developing a competitive digital banking option, though necessary, cannot come at the expense of maintaining a strong system of physical branches.