When was the last time you walked into your bank’s local branch, handed a teller some checks to deposit, withdrew some cash for your getaway weekend, and grabbed a lollipop on your way out the door? If you can’t remember the last time the bank was on your errands list, especially in the past few months, you’re not alone. As banks have improved their online services to meet customer needs, the entire function of a branch is changing – to the point where you might not recognize it in a year or so.
According to a recent Bankrate survey, 39% of respondents had not been to a bank branch in the past six months (this didn’t include visits to an ATM). Though people of all ages and income levels said they continue to use bank branches for various activities (including millennials), the frequency of bank visits declines with income. Those making $75,000 or more were likely to have visited a branch within the past month, but that frequency dropped off as income declined.
People who are making more money are more likely to have a banking relationship in the first place, Bankrate’s Chief Financial Analyst Greg McBride told The Cheat Sheet. “But beyond that, they’re also likely to have deeper financial relationships,” McBride explained, saying they might have a mortgage with the bank, or investment accounts for retirement or their children’s college tuition.
“There’s an incentive for financial institutions to get as much of that business under their roof as possible,” McBride said, which explains why people with more money to spend on banking services haven’t switched entirely to mobile transactions.
However, typical transactions like withdrawals, account transfers, and deposits have been shifting out of branches to online or mobile apps, designed by banks in order to meet customer demands. “Routine day-to-day transactions have been migrating out of the banks for years, and that’s continuing,” McBride said.
As a result, the landscape of banking in the United States is changing, and will likely continue to do so for the next several years. You might still be able to track down that cherry Dum-Dum, but it’s a safe bet that your branch won’t operate in the same ways it has in the past.
In countries like Sweden, it’s already possible that bank branches won’t exist at all anymore. The ones that do stick around will serve more as flagship operations, guiding people to more complex operations, like setting up a mortgage.
McBride doesn’t believe all bank branches in the U.S. are in trouble. “They’re not going to go away, but the function is going to change, the number is going to change,” he said. Just as a multitude of homes were built just before the housing bubble, financial institution built a few too many local branches. We’ll start to see more of those close up shop, McBride said, but many will stick around to offer what a mobile app still can’t replicate.
Though there’s an advantage to sitting down face-to-face with a financial manager or bank representative for complex transactions (like refinancing your home’s mortgage, for example), many of the branch functions will serve abstract needs, too. Many people are content to upload a photo of the check Grandma sent for Christmas to deposit it using an app, but most people still like the security of knowing a branch exists, should a problem arise.
“When the level of financial anxiety increases, people tend to make more instinctive financial decisions, rather than analytical. This, for many people, means to physically be in the place where the money is. It gives them comfort seeing the place,” Dan Geller, Ph.D., behavioral finance scientist at behavioral economics and finance firm Analyticom, told Bankrate.
This was the case during the financial crisis, McBride said, when people found comfort even just by driving past their branch. “They wanted to know their money was safe,” he said. “They knew it was there.”
Bank branches will shut down as people use them less, but the centralized ones that do survive will likely look very different when it comes time for a remodeling. A common model we’ll likely see, McBride said, is a design that’s not focused on the teller line as much, but one with a centralized kiosk where one or two people can refer you to a specialist who can help with your requests about investments, loans, or other services. Bank personnel will likely be cross-trained to handle a range of different requests, McBride added, making the process a more streamlined approach.
“It’s all about meeting the needs of what customers want,” he said.