Will Branches Survive the Shift to Digital?
The torrid pace of bank branch closures continued unabated last year. In the U.S. alone, over 1,700 branches closed—a record. This follows several years of rapid reduction in the number of branches. Between 2012 and 2016, for example, Chase, Bank of America, and Citi shrank their branch footprints by 2.4%, 16%, and 28.5%, respectively.
Banking providers have maintained multiple locations for centuries, but the modern retail strategy emerged in the early 1900s as a way to enter new markets, broaden the deposit base, and reach consumers where they lived. Retail financial institutions could offer convenience to people where they were and better serve them, growing a customer base centered around the branch.
Banks and credit unions subsequently doubled down on this strategy. Recognizing that people were busy and couldn’t always make it to their branch, banks opened locations inside of grocery stores so customers could bank while they shopped. This strategy arguably culminated with ATMs, which could be put almost anywhere, reaching customers wherever and whenever they needed the most basic banking services.
But with the ubiquity of mobile apps, many people’s banking habits now rely less and less on ATMs and other forms of physical infrastructure. What then, is the right branch strategy for the digital era? Is the very concept of branches now dead?
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