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The Demise of the Bank and Credit Union Branch Has Been Greatly Exaggerated

Published 04.28.2021

Traditional financial institutions need to capitalize on an orchestrated and personalized customer experience thoughtfully delivered across channels.

Banks and credit unions are increasingly shuttering brick-and-mortar locations amid the economic disruption from the COVID-19 pandemic. Lockdowns and social distancing have made financial institutions rethink not just the way they acquire and retain account holders, but maintaining their real estate footprint to do so as well. In the meantime, those in the fintech space are trying to capitalize. But the real reason for this brick-and-mortar austerity from traditional financial institutions goes beyond digital channels disrupting the status quo. What makes this so challenging is that many consumers depend on their local branches and banks and credit unions need local market anchors. It’s up to the traditional institutions to target the right customers while rethinking their business models to ensure their relevance in the post-COVID landscape. 

The prevalence of branch closures isn’t just a result of the pandemic. A report compiled by consumer data company Statista found that the number of open bank and credit union branches in the United States has fallen by an average of 902 locations per year. From 2012 to 2015, the closure rate was 0.81 percent per year, and from 2015 to 2018 the rate jumped to 1.6 percent per year. At that rate, closures have doubled every three years. Any digital-only fintech company worth its weight will pounce on these alarming statistics. In fact, they have. 

When citing the Statista information, fintech platform “Self” stated that the current trend suggests that all bank and credit union branches could be closed by 2034. But let’s back up for one second. That level of apocalyptic prediction for banks and credit unions has bubbled up many times before. It’s easy for digital disruptors to assume the industry they’re attempting to break through will totally go away. The COVID closures just fanned the flames of doom and gloom. 

The rate of closures is up, but let’s not discount the strategies behind keeping certain branches open.

“Self” commissioned a study of just over one thousand U.S. consumers in mid-2020 to dig deeper into the current banking discontent. What they found is that nearly half of respondents simply said the current systems need to change — not left to die altogether. Distrust is felt most in the younger generations. But, in fact, nearly half of respondents also don’t trust new systems like online-only banking, 70 percent still have trust in banks and credit unions that have a physical presence, and over half say accessing cash and in-person advice are the main reasons they actually prefer physical bank branches. 

The whiplash between predictions of every single bank and credit union branch being closed in the next decade or more is — admittedly — a bit much. Traditional institutions will just have to split the difference and evolve to the needs of the new normal. U.S. Bank CEO Andy Cecere agrees: “Branches are still important, but they’re going to be less of a place where people go for transactions and more for advice and consultation,” he said at the Goldman Sachs U.S. Financial Services Virtual Conference in December 2020. “Therefore, they don’t need to be as many, and they don’t need to be as large.”

Consumers want to be known, understood, and engaged with true connections.

The rate of closures is up, but let’s not discount the strategies behind keeping certain branches open. Based on the data, and despite expedited digital capabilities, physical locations are absolutely necessary for generating new accounts, driving deposits and loans, and maintaining consultative financial advice. 

The overwhelming cause of branch closures likely reflects multiple factors, and, tried and true financial institutions don’t need to roll over and die, they just need to evolve to accommodate the same digital solutions that are largely driving the explosive digital-only growth. Consumers want to be known, understood, and engaged with true connections. This requires an orchestrated and personalized experience thoughtfully delivered across channels. Banks and credit unions will just need to capitalize on acquiring consumers that align with the quality and value of target markets yearning for omnichannel solutions.


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