The Shrinking Number (and Footprint) of Bank Branches Today
Date: October 2, 2014
Is branch banking going the way of the fax machine? This question has been the subject of the much speculation in the business press over the past several years. The most recent FDIC report notes that the total number of bank branches of commercial banks and savings institutions was just under 95,000 as of June 2014, down 1.7% year over year and down 4.8% over the five-year period from June 2009.
Although some of the reduction in branch totals is the result of cost savings efforts and consolidation due to mergers and acquisitions and branch network rationalization, financial institutions (FIs) are in the process of eliminating redundant branches in an attempt to “right-size” their operations. While it’s true that today’s banks, credit unions, and other FIs are under increasing pressure from both internal and external forces to reduce costs and increase profitability, customer and member satisfaction remains a top priority.
It is too soon to write the epitaph for branch banking. Branch strategy is evolving, with a wide variety of configurations including “hub-and-spoke” branches, where traditional branches coexist with minibranches and flagship branches, depending on customer and market needs.
Branch footprints, which had ranged from about 5,000 to 10,000+ square feet, are being reimagined in new configurations that can be as small as 1,500 square feet (and smaller with “pop-up” branches) and include many new branches—most with expanded digital banking capabilities including ATMs, tablets, and kiosks—in the 2,500–4,000 square foot range.
Financial institutions are grappling with the best approaches to meet the needs of today’s customers as they realize that the overall customer experience is key to maintaining and building long-term relationships and lasting loyalty. At the core of this thinking is the need to more efficiently use their branch and digital assets to meet or exceed customers’ expectations, no matter the configuration or footprint size, and allow them to bank when, where, and how they please.