Why modern banks are (still) investing in brick-and-mortar branches
Despite the trend toward digitization and a shrinking branch footprint, the brick-and-mortar bank isn’t disappearing anytime soon.
In June, JPMorgan Chase opened one of the largest branches in the country—a 12,500-square-foot emporium in Midtown Manhattan. Both Chase and Bank of America announced last year that they would open 400-500 new branches in the next half-decade.
Yet more than 1,700 bank branches closed nationwide between June 2016 and June 2017, according to the Wall Street Journal—the largest yearlong decline for bank branches on record. Is this year different, and if so, why?
First, it’s important to note that while banks continue to open new branches, they’re not building at quite the same pace as they’ve done in the past. Chase might be the exception, pushing ahead with 123 new banks in the last three years, compared to a more modest 54 from BofA and 45 from Wells Fargo. Even community banks and credit unions keep building slowly, if only one or two branches a year.
Meanwhile, technology is blazing ahead in consumer banking, with close to 70% of people preferring a digital experience over an in-branch experience, according to the 2019 Future Branches Consumer Study. Online banking platforms and mobile apps let you check balances, pay bills, and deposit checks remotely—features that customers have come to expect.
Yet branches are not dead for a variety of reasons, according to the Future Branches Consumer Study:
Customers want face-to-face experiences.
When customers perform highly personal or important tasks such as opening a new account, they often prefer one-on-one time with bank associates. If applying for a loan, 52% of customers say they do it in person.
It’s simply routine.
Most bank visits are quick pitstops at the ATM. It’s not just a personal connection with bank associates that attracts customers—more often it’s the draw of self-service features that they’ve enmeshed into their daily routines.
Branches drive business.
A whopping 94% of customers say they prefer a bank that has physical branches, as opposed to the newer wave of digital-only banks like Goldman Sachs’ Marcus and BankMobile. In smaller towns and less urban areas, retail banks are part of the fabric of the community—places where locals can stop by, say hi, and even grab a cup of coffee.
What does it mean for the future of banking that branches persist in a digital world?
The digital experience is still surging, and with almost two-thirds of mobile banking app users in the 18–42 age bracket, digital will become even more ubiquitous in the years ahead.
The main takeaway is that digital doesn’t rule out brick-and-mortar or eclipse it completely. The sweet spot is delivering both experiences, because customers crave that versatility. Consider Chase: They have 50 million digital customers, more than any other bank. Yet more than 1 million people still visit Chase’s 5,000 nationwide branches daily.
And just because branches are still here, they’re not necessarily the old branches. Chase’s new Manhattan emporium offers state-of-the-art ATMs and even a digital advice bar.
The lesson for banks is twofold: Keep your eye on the digital prize, but don’t throw branches by the wayside. Customers want to pivot between great experiences—in both places.
For more on how to build an integrated, digital experience for your customers: