Why Bank Branches Are at Risk for Disappearing (but Will Never Go Away Entirely)

by Edward O'Brien 0

“Bank branches are disappearing from the financial services landscape, but will they go away entirely?
With a 40% decline in U.S. bank branches since 1991 and a projected continuing decline of 25% by 2018, according to banking industry business intelligence firm FMSI, it’s a fair question to ask. In a wide-ranging study, FMSI says the drop-off in branches may prove to financial institutions that keeping bricks-and-mortar local banking centers running isn’t sustainable or cost efficient.”

“Our study reveals a declining branch transaction trend of which senior management at financial institutions should take note,” says W. Michael Scott, chief executive at FMSI. “With transactions dropping and staffing levels remaining the same, the inevitable outcome is costly overstaffing in the branch environment.”

To paraphrase Mark Twain, the reports of the death of bank branches have been greatly exaggerated. This point has been made consistently in several recent Mercator Advisory Group Banking Channels reports and research notes. Consequently, banks and credit unions need to be vigilant in their branch staffing and deployment models to ensure that their branches are the right size for their markets, as well as to effectively accommodate full-, self-, and assisted-service options. The availability of branches remains an important reason many banking customers choose – and stay with – their primary financial institutions.

Overview by Ed O’Brien, Director, banking Channels Advisory Service at Mercator Advisory Group

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