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U.S. Bank increased its technology spend in the third quarter to further digitalize capabilities within its branch network. “Our strategy focus is to create density in the highest growth areas within our current footprint, rather than use branches to expand out of our footprint,” U.S. Bank President Gunjan Kedia said during today’s Q3 earnings call. […]
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Courtney Blackann
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Michael Nagle/Bloomberg
An uninterrupted march toward fewer branches has permeated the banking industry since 2010.
But, while the movement accelerated early this decade,
It would mark a substantial change if realized. In 2009, the last year that physical locations increased, there were nearly 100,000 branches across the U.S. There are
Analysts say banks are investing more in their online platforms, where customers prefer to handle increasingly more of their banking transactions. As a result, fewer branches are needed, and banks overall are continuously trimming their physical footprints in response, pushing some of the savings to their bottom lines and reinvesting the rest in evolving technology.
“The long-term trend of shrinking branch numbers will continue as banks embrace technology and mobile banking,” Jacob Thompson, managing director at Samco Capital Markets, said in a recent interview.
There were about 77,500 bank branches in the U.S. at the close of 2023, according to updated estimates from S&P Global. The trend was hastened by the social distancing measures enacted to
Taking into account openings and closings, U.S. banks
A long-running
National and regional banks have led the branch downsizing charge, mostly because they have the largest networks and therefore the most cutting to do. However, banks of all sizes are shifting investments away from physical locations and toward digital platforms.
However, bank M&A slowed in both 2022 and 2023 amid higher regulatory scrutiny and broad uncertainty imposed by interest rates that surged over the past two years. There were
Additionally, early in his current administration, President Joe Biden called for increased enforcement of the Community Reinvestment Act, and regulators are asking more questions about planned branch closures, working to ensure that residents of low- and moderate-income communities are not left without convenient access to physical banks — a hallmark of the CRA.
The result: A net 1,409 bank branches closed in 2023, compared with 1,854 in 2022, according to the S&P Global data. Both years were down notably from the all-time high in 2021.
What’s more, most bankers say that even their most tech-savvy customers want physical bank offices where they can seek financial advice, open new accounts or manage major transactions such as getting a significant loan.
Banks also say branches in high-traffic areas function as vital billboards. In neighborhoods with booming populations or fast-growing economies, banks do still carefully open some new branches, even as they close others elsewhere. That includes some big banks that are opening more new branches this year after years of scaling back.
PNC Financial Services Group is a case in point. After downsizing its retail network in recent years, the $562 billion-asset company said in February it would renovate more than 1,200 existing offices and
PNC said it would invest about $1 billion in the effort, with the new branches getting built between 2024 and 2028. The bank currently operates approximately 2,300 branches.
While fewer are needed than in past eras, “branches will always have an important role,”
Additionally, the $3.9 trillion-asset JPMorgan Chase in New York, the nation’s largest bank, said its retail business is in the midst of
“In 2023, we built 166 new branches, and we’re planning about a similar number this year,” JPMorgan CFO Jeremy Barnum said on the company’s fourth-quarter earnings call in January. The company started 2024 with about 4,900 branches.
Still, analysts say banks are bound to continue shifting resources toward their online platforms. This will further diminish the need for large branch networks. It may also enable institutions to further downsize their physical footprints and reinvest the savings in digital services — though perhaps not at the record pace of recent years.
Terry McEvoy, an analyst at Stephens, said in an interview that PNC, for example, had certainly shone a new spotlight on branches. But even as the regional bank builds new ones in major cities, it may continue to close some in others.
“It is a shift in strategy, though a very targeted shift to focus on growth markets,” McEvoy said.
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Jim Dobbs
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The overall pace of
U.S. banks closed 2,118 branch locations between January and the end of October, according to data from S&P Global Market Intelligence. That was a 19% decrease from the 2,614 branches shut down over the same period in 2022.
Roughly 22% of the closures were carried out by two super-regional banks — PNC Financial Services Group and U.S. Bancorp — both of which shuttered around 10% of their branches.
Across the industry, the total number of branches fell for the 14th straight year in 2023. There were 77,690 active bank branches nationwide at the end of October, according to S&P data, down from 79,000 branches at the end of 2022.
While larger banks top the list of financial institutions that have
The appeal of saving on staff, facilities and other branch-related costs has driven merger and acquisition activity in recent years, especially at banks with plenty of branches. After longer-than-usual deal approval processes for many of those deals, some acquirers have finally managed in 2023 to execute planned branch closures.
Here is a closer look at the five banks that closed the largest shares of their branches this year, through October.
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Orla McCaffrey
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On the heels of a tumultuous spring that saw three of the four largest bank failures in U.S. history — Silicon Valley Bank and Signature Bank went under in March, followed by First Republic in May — many customers of smaller institutions quickly moved their deposits to “too big to fail” banks — and those financial institutions grew by acquisition, too.
As the banking crisis drags on, pressure is building on financial institutions to find new ways to compete for deposits in the changing market — and customer loyalty is more important than ever.
Despite the rise of digital banking, the brick-and-mortar branch is still a critical component in building customer loyalty. In fact, many conventional banks are putting increased emphasis on their physical branches as the prime differentiator for their services. A survey by Blend found that the vast majority of respondents are multi-channel customers, and the top reason surveyed customers gave for switching banks was actually the inconvenient location of their local branch.
However, the nature of these physical branches is changing. With digital transactions continuing to rise, customers have less of an everyday need to visit their bank and typically only do so to engage in more complex activities like taking out a loan or receiving financial consultations. These interactions are key; the banks that are poised for the greatest success in the coming years will be those that can provide a personalized service that blurs the line between the digital and physical.
Retail banking customer service has the difficult task of serving customers across the gamut of banking needs and across multiple channels. Banks typically employ different software tools for managing accounts, handling loan applications and getting insights into customer income, debt and credit. Furthermore, the platforms used for online services are often different from the ones used by in-branch staff.
When customers are multi-channeled but systems are siloed, service delivery is inevitably hindered. Not only does it take more time and effort to provide offers and recommendations to customers, but it also takes longer for employees to gain proficiency across the platforms. This can translate to less timely and personalized results for customers.
By combining these discrete internal software tools into a unified, omnichannel platform, banks stand to gain a leg up on competitors through increased customer engagement. Removing complexity from the origination process helps focus bankers on the customer’s goals, rather than on navigating the system and data input. Automated workflows and verification services reduce the time to complete rigorous tasks including credit card applications and approving personal loans, and allow for more timely service and advice to be offered in person at branches.
As a bonus, streamlining with a single, intuitive software tool that can administer tasks typically siloed across multiple programs can also help soften the learning curve for onboarding new employees.
Ultimately, in this competitive era, institutions that master the art of seamless, intuitive and personalized banking experiences will be the ones to thrive through the downturn and beyond.
Nima Ghamsari is co-founder and chief executive of Blend, and chair of its board of directors. He leads the company’s corporate and product strategy, and in 2020 was included in Fortune’s 40 Under 40 list.
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Nima Ghamsari
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On the heels of a tumultuous spring that saw three of the four largest bank failures in U.S. history — Silicon Valley Bank and Signature Bank went under in March, followed by First Republic in May — many customers of smaller institutions quickly moved their deposits to “too big to fail” banks — and those financial institutions grew by acquisition, too.
As the banking crisis drags on, pressure is building on financial institutions to find new ways to compete for deposits in the changing market — and customer loyalty is more important than ever.
Despite the rise of digital banking, the brick-and-mortar branch is still a critical component in building customer loyalty. In fact, many conventional banks are putting increased emphasis on their physical branches as the prime differentiator for their services. A survey by Blend found that the vast majority of respondents are multi-channel customers, and the top reason surveyed customers gave for switching banks was actually the inconvenient location of their local branch.
However, the nature of these physical branches is changing. With digital transactions continuing to rise, customers have less of an everyday need to visit their bank and typically only do so to engage in more complex activities like taking out a loan or receiving financial consultations. These interactions are key; the banks that are poised for the greatest success in the coming years will be those that can provide a personalized service that blurs the line between the digital and physical.
Retail banking customer service has the difficult task of serving customers across the gamut of banking needs and across multiple channels. Banks typically employ different software tools for managing accounts, handling loan applications and getting insights into customer income, debt and credit. Furthermore, the platforms used for online services are often different from the ones used by in-branch staff.
When customers are multi-channeled but systems are siloed, service delivery is inevitably hindered. Not only does it take more time and effort to provide offers and recommendations to customers, but it also takes longer for employees to gain proficiency across the platforms. This can translate to less timely and personalized results for customers.
By combining these discrete internal software tools into a unified, omnichannel platform, banks stand to gain a leg up on competitors through increased customer engagement. Removing complexity from the origination process helps focus bankers on the customer’s goals, rather than on navigating the system and data input. Automated workflows and verification services reduce the time to complete rigorous tasks including credit card applications and approving personal loans, and allow for more timely service and advice to be offered in person at branches.
As a bonus, streamlining with a single, intuitive software tool that can administer tasks typically siloed across multiple programs can also help soften the learning curve for onboarding new employees.
Ultimately, in this competitive era, institutions that master the art of seamless, intuitive and personalized banking experiences will be the ones to thrive through the downturn and beyond.
Nima Ghamsari is co-founder and chief executive of Blend, and chair of its board of directors. He leads the company’s corporate and product strategy, and in 2020 was included in Fortune’s 40 Under 40 list.
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Nima Ghamsari
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Banks keep shaving off the number of minutes they say it takes to open an account online. But in the branch, the process can take an hour.
The topic came up during Michelle Moore’s keynote at American Banker’s Digital Banking conference in June. Moore, the head of consumer digital at Wells Fargo, said the bank is aiming to further digitize account opening in the branch.
“If it takes two minutes or less to open a checking account on the phone, why is it not that process in the branch?” she said as an answer to an audience question. “The checking account opening experience should not be a 45 minute, hour conversation, printing all kinds of materials and typing in 40 fields of information. The application should be about five minutes. The rest of the time should be the conversation.”
In-branch account opening is typically handled by teller management systems, whereas online account opening is on a separate platform, points out David Schiff, head of retail and consumer banking at West Monroe. The know-your-customer and anti-money-laundering checks that were optimized for fluidity online have not all migrated to the branch. Financial institutions may be hesitant to devote the time and resources to changing their systems and re-training branch staff.
There are also infrastructure limitations.
“I was surprised at how many banks don’t have public WiFi in their branches,” said Schiff.
Some banks, including Bank of America and F.N.B. Corp. in Pittsburgh, are taking steps to upgrade their branch technology. Despite advances in online and mobile account opening technology, people sometimes still prefer coming to the branch for guidance or advice, or may want to start the process in one channel and finish in another.
Banks can capitalize on these face-to-face opportunities to deepen their relationships. This ability to make a sales pitch in person is one reason banks still prize branch account opening.
“That initial touchpoint is the most valuable and why sometimes account opening takes so long,” said Schiff. “There is a perverse incentive for banks to make that process feel advisory and mechanical because it gives them an opportunity to have more conversations while the system is processing.”
Moreover, “There is still a mentality at a lot of banks that most information they can collect about the customer is through that face-to-face interaction,” said Schiff.
Some people just feel more comfortable having a person on standby.
“I like to ask a lot of questions,” said Vincent Delie Jr., president and CEO of FNB, speaking of his experience as a bank customer. “Sometimes it’s easier to give people permission to key in your name, address and phone number, and walk you through the process than it is for you to fumble online.”
FNB has made leaps in digital account opening that it plans to integrate into its branches. The bank’s eStore platform lets users of the website, app or in-branch kiosk browse an array of deposit accounts, loan types, business products, financial education content and more, add selected items to a “shopping cart,” and “check out” — that is, apply or learn more. In June, FNB announced its eStore Common application, which lets users apply for multiple products simultaneously with pre-filled information. The middleware is proprietary to FNB but it uses vendors to authenticate customers.
But the ultimate vision for the $44.1 billion-asset bank is weaving digital and traditional channels together for a consistent user experience, or what Delie Jr. calls “Clicks-to-Bricks.”
“A lot of what you have observed [concerning redundant and paper-based processes] is what drove our whole strategy,” said Delie Jr. “The goal for Clicks-to-Bricks is to have the same type of speed and interaction capability we have with mobile and online in our physical branches.”
Today, users of the in-branch kiosk can send their eStore cart to their email address or inform the branch that they’d like to check out there. Relationship bankers are also equipped with tablets they can use to educate customers on products. If customers want to open an account in a branch, for now they have to go through FNB’s traditional platform with a banker; alternatively, they can do so on their personal device digitally with the assistance of a banker. (There is no public WiFi, however.) A next step is to embed more of these fast, slick eStore capabilities into account-opening technology in the branch.
FNB is also working on other upgrades to make the whole eStore experience smoother, such as letting customers upload a photo of their identification as part of KYC. The bank plans to introduce account-opening capabilities into its video teller machines.
Bank of America, meanwhile, is bridging the benefits of in-person guidance with the ease of using a personal device.
“One of the biggest challenges when a prospect or a customer new to the bank comes to open an account is, if you don’t have any data on them, the associate often has to do a lot of data entry to open the account,” said Ryan Furey, digital executive for retail at Bank of America. “It becomes slow and laborious. But when you think about digital, newer technology and capabilities add a lot of convenience and make it more personal for the individual.”
When someone discusses new accounts with an associate in a branch, the banker can now push any consumer products they recommend to the “saved items” list in the customer’s mobile app. (A new customer would have to first download the app and build a basic profile.) The customer will receive a notification that something was added to their saved items. From there they can begin the application on their phone, with the banker standing by in case they have questions. Public WiFi is available for customers.
Bank of America has done this for existing customers for several years, and started piloting it for new customers last year before expanding the capability to all branches. A higher percentage of new customers want to open an account in a branch compared with existing customers.
One question banks must contend with is how to handle the incentives tellers get for opening accounts in a branch, and how to avoid creating unintentionally perverse incentives.
“It’s less common post-Wells Fargo, but still common enough to be viewed as typical in the market,” said Schiff. Incentive programs can be tied to opening target volumes of specific products at the individual banker, branch or market level. Bank of America was recently ordered by the CFPB to pay $250 million for, among other things, illegally opening a small number of credit card accounts without customers’ knowledge or authorization.
FNB geocodes customers who arrive via a digital channel and gives credit to the nearest branch. It is also converting tellers into “relationship bankers” who are equipped to handle a broad range of consumer banking tasks and whose positions are incented differently.
At Bank of America, “When they engage with the client through the saved items list and make recommendations, we can account for that within our internal systems that they were involved with the sales process,” said Furey.
Another issue banks want to solve is letting people start the process in one channel and finishing in another.
“For a number of years this is something account opening vendors have been focusing on,” said Mark Schwanhausser, director of digital banking at Javelin Strategy & Research. “This idea that if we can create a single platform where someone starts online or mobile, they can resume it there, or if they go into a branch, the material is there. There are not two systems for processing.”
Delie Jr. said it’s a critical piece of FNB’s strategy. Furey said Bank of America started out by testing for situations where someone was interested in a product, but needed time to think about it. Adding it to their saved items list made it easy to retrieve at home.
“It’s not enough to make your process faster, to take it from six minutes to five minutes,” said Schwanhausser. “The important thing is to get them in the right product, get them engaged and get deeper relationships as quickly as possible. Ideally a banking relationship goes for decades. How can you start that off on the right foot?”
Even purely digital account opening capabilities have their hiccups.
“Some banks have put in really slick digital solutions for online account opening, but it may take ten to 12 days for the account to fully open because they are verifying things like my driver’s license picture,” said Schiff, who regularly opens bank accounts for his work. “If I weren’t doing it to experiment and understand what the process was, I would probably abandon it and open my account somewhere else.”
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Miriam Cross
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Joshua A. Bickel/Bloomberg
After community activists expressed opposition to a bank branch closure in a low-income section of Toledo, Ohio, Senate Banking Committee Chairman Sherrod Brown urged regulators to scrutinize branch closures that spark local concern.
Brown, an Ohio Democrat, wants the Office of the Comptroller of the Currency to hold public meetings on branch closures in situations where community members request them. He also says the OCC should require banks to meet all legal requirements before they’re allowed to close branches.
“Banks serve a unique role in the functioning of our financial system and economy,” Brown wrote in a March 2 letter to acting Comptroller Michael Hsu. “That is why they must serve the needs of all members of their community, and all communities across the country.”
Brown’s letter referenced the situation in Toledo, where the nonprofit Fair Housing Center recently asked the OCC to hold a public meeting on Fifth Third Bancorp’s plan to close a branch in the Englewood neighborhood. Brown wrote that he supports the OCC holding a public meeting.
The Fair Housing Center wrote in a Feb. 16 letter to the OCC that the branch closure will deprive the surrounding neighborhoods of banking services and credit opportunities that local residents need.
“The neighborhood where this bank branch is located is an area that was historically redlined and has remained segregated by race due to the lasting effects of those policies,” the group wrote.
In a Feb. 23 response to the Fair Housing Center, the OCC said that it will consider the group’s comments in its next Community Reinvestment Act evaluation of Fifth Third. But it did not commit to holding a public meeting.
“The bank’s decision to close the branch office is a business decision that does not require the approval of the OCC,” wrote Jason Almonte, the OCC’s director for large bank licensing.
When asked Monday about the OCC’s view on whether, and under what circumstances, public meetings on branch closures should be held, an agency spokesperson had no immediate comment.
A Fifth Third spokesperson said that the Cincinnati-based bank is continuously evaluating its branch network, and that it takes into account consumer preferences.
Fifth Third will keep an ATM at the site of the shuttered branch in Toledo, and customers will be able to use online and mobile banking services, in addition to visiting other Fifth Third branches, according to the spokesperson.
“Although we have one location closing in Toledo, we have two additional financial centers within the same zip code to serve customers. Our team has been welcoming and working with those customers as they transition,” the Fifth Third spokesperson said in an email.
The spokesperson also noted that the OCC gave Fifth Third an ”outstanding” rating on its most recent Community Reinvestment Act examination, which covered 2017 to 2021. Fifth Third said in January that it was planning to close 23 branches in 2023, mainly in the Midwest.
George Thomas, CEO and general counsel of the Fair Housing Center, said in an interview that Fifth Third’s notices to customers about the branch closure in Toledo did not note that people could submit comments to the OCC about the branch shutdown.
A provision of federal law states that when an interstate bank proposes to close a branch in a low- or moderate-income area, the notice to customers “shall contain the mailing address of the appropriate federal banking agency and a statement that comments on the proposed closing of such branch may be mailed to such agency.”
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Kevin Wack
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