Since 2008, big banks across the united states have been reducing their branch footprint, but all continue to say that branches are key to their growth (Source: FDIC). So what's the deal?
During the last recession, many organizations, especially banks, looked to ways of reducing their operating expenses. Underperforming branches were an easy target to cut large portion of that operating budget, right away. What they found through the following decade is an interesting tale of migration - the #1 cause of banks losing customers is by customer migration (Moving their home)... and likewise, the #1 cause of acquisition of new customers and deposits came from out of state migrants moving close to where their branches are located.
Thus began a new strategy and approach of new branch builds - build branches in locations where large populations are moving and you will be able to capture market share.
And that has been the case through the COVID pandemic. While state-to-state migration continues to slow across the United States (in fact the lowest since 1914), there has been an acceleration in new bank branch deployments in new markets. JPMorgan, Bank of America, and PNC all are adding new bank branches at a faster rate than they have in the decade past. But all of their growth is centered around a building a few branches located in new and less competitive markets.
As market pressure continue to rise as we head into uncertain economic pressures for 2023, banks are still being forced to reduce their branch operating expenses while offering better customer service and extended hours. Thankfully, new technologies are enabling banks to explore better serviceable solutions for their clients, allowing them to do exactly that.
More to come on banking technology and the impacts of the branch closings.
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