Not quite a fare-thee-well for bricks and mortar

There’s no question the pandemic has changed how people interact with their bank. Consider the insights released from a study of 1,114 Americans, split equally by gender though 77 percent of them are younger than age 45. The study, conducted last summer by Texas-based fintech Self Financial, found:

  • 34 percent of respondents opened an online-only bank account in the past 12 months.
  • More than half believe online banks will eventually outnumber traditional banks.
  • 46 percent believe the way people currently bank needs to change.

Added to this shift toward digital and increased acceptance of new technology spurred by necessity is the actual drop in the number of branches in the United States, which peaked at 82,965 in 2012, according to the FDIC, but has been dropping ever since, to 76,837 in 2019. 

The loss of 6,128 branches isn’t a cliff; it’s a slope. And not a steep enough one to support Self Financial’s claim that “all bank branches could be closed by 2034.” 

In a conversation about branches, it’s important to note that in the middle of the country, where most of the banks operate, there is a different trend. Community banks in the heartland are still investing in branches. Consider the data we present each issue in our Fed and state filings sections. Federal and state filings show that 19 new branch applications have been filed with regulators; meanwhile, applications to close a branch were filed by four banks. In our March edition, the number of applications to open a branch (six) exceeded applications to close a branch (three). In our February edition, the number of new branch applications across the region was 11, while there were only two applications to close a branch in that same period. That’s a net gain in each of the last three months. 

The landscape for banking here in the country’s midsection doesn’t fit the narrative proffered by fintechs and coastal-focused industry analysts. Branches are not dying. 

That doesn’t mean it’s business as usual for community bankers considering their branch strategy. Far from it. Branches are transforming, just as they have from the beginning. The question of the month is: How are they transforming? What will be the lasting effect from the year of intermittent lobby closures, plastic shields, cleaning rituals and socially-distanced interactions? This is the question we posed to bank architects in our annual check-in on the topic of bricks and mortar. These professionals have important insights to share on how community bankers can continue to serve their communities through their branches.