No Longer a Need for Bank Branches
Killing sacred cows is tough and suggesting it rarely earns you many friends. It can often lead to an outpouring of caustic comments and concerns about one’s sanity.
Every business has its share of sacred cows and in the consumer banking business branches are still considered sacred cows by the majority.
I find this belief dripping with irony given all the efforts since the installation of the first through-the-wall ATM to keep consumers out of the branches.
The latest effort is snap, tap, and send to deposit checks via your mobile device.
The ultimate irony is that most of the push-back when I mention branches becoming obsolete comes from bankers who, themselves, probably never use the branch for transacting business. They might wander in occasionally to be seen by the lonely employees or to take a visual poll of who’s actually using the branch these days.
What got me started on this rant, again, is a recent article, “PremierWest Bank Consolidates Branches Due to Banking Trends,” dated January 16, 2012, and appearing on the MyBankTracker website.
I love the use of the word “consolidates” when, in reality, they are actually CLOSING 11 branches – mostly in smaller towns in southern Oregon and northern California.
I applaud the bank for finally reaching the obvious decision and moving forward to actually eliminate low-performing branches.
Hopefully, like a virus, this will catch on and spread rapidly across the country.
Face it – do we really need bank and credit union branches spread across every community in America?
USAA Savings Bank has grown dramatically over the past three decades and has only one branch and it’s located at the company headquarters in San Antonio, Texas. I’ve been a customer since 1970 and I’ve never visited this branch.
Now some of you who know me personally will think I’m being disingenuous here as I still have a checking account and small savings account at the local credit union. True! But, I don’t have a need to ever visit the branch. I do everything online. I only drop in occasionally to see if there’s something going on that’s worth blogging about.
And two of the nation’s fastest-growing banks are online-only banks – Ally Bank and ING Direct. Before you comment that ING Direct doesn’t count, I’ll admit that they fiddled with a few cafés where you could drink coffee and do some banking. But, in reality, ING Direct is an online-only bank.
Consumer banking is experiencing what economist Joseph Schumpeter called “creative destruction” and unfortunately, the powers-that-be are fighting it all the way. They simply don’t want to acknowledge the fact that consumer banking no longer requires branches to meet the banking needs of most consumers.
“We still need branches to open new accounts and cross-sell” goes the line of reasoning today. Not really!
“Branches help us with our branding efforts.” Not really!
If USAA, Ally, and ING Direct can open new accounts and cross-sell online, so can all the other banks and credit unions.
Another issue here is that the banking industry is emotionally attached to the familiar brick and mortar branches visible while driving around town. Expensive branches are tangible proof that their business actually exists. They can point proudly to each one while driving by and be comfortable in the fact that their business is represented by hard assets that consumers can touch, feel, and experience on a daily basis.
There are a number of ways to continue justifying the massive expense of these branch networks…but most, if not all, of them are emotional and not rational.
To me, at this point in time PremierWest Bank is an outlier.
Their move is unlikely to be the beginning of a trend to close branches across the country.
But mark my words – at some point in the not-to-distant future, something is going to occur that will accelerate branch closures and it will then become a rush to the exit.
Will we ever see the total demise of bank and credit union branches?
All I can say about the timing is that I’m still waiting for the paperless office and the paper check to become obsolete.
But I’ll stick to my belief that the branch has outlived its usefulness for consumer banking.
By the way, I’ve written four earlier blogs about the uncertain future of branch banking. Here they are from the oldest to the most current:
“Do We Really Need Bank and Credit Union Branches?” dated June 23, 2010, available here.
“The Impact of Creative Destruction on Branch Banking” dated February 1, 2011, available here.
“The Uncertain Future of Branch Banking” dated June 30, 2011, available here.
Please read them all before commenting that I must be smoking something and have lost my mind. Thank you.