Banks continue to rationalize their real estate footprints across the U.S. They are closing branches and reinvesting in digital channels. For the most part, the growing popularity of digital channels replaces the need for many customers to visit a banker in person. But for poor, rural communities, the evolution to digital is happening at a slower pace than branch closures are, leaving customers underbanked and increasingly, unbanked, according to research from the Federal Reserve Bank.
Overall, roughly half of U.S. counties lost bank branches between 2012 and 2017. While more affluent areas also lost branches, the effect is more pronounced in rural areas because they had weaker branch penetration to begin with.
Poorer communities hit harder
The most affected communities tend to be poorer, with lower median incomes and higher poverty rates. People who live in these communities also tend to have less education and are more likely to be African American. These residents frequently lack transportation to get to the new locations of their branches.
As part of its research, the Federal Reserve Bank conducted listening sessions with rural residents. Researchers learned that while some lower income bank customers did switch from branches to other forms of digital banking, many found web connectivity expensive or unreliable, while older customers weren't comfortable using web or mobile banking options.
How customers choose to access their bank accounts
Bank branches still remain the most widely-used method for individuals to access a bank account. Nearly three-quarters of banked households in the United States reported using a bank teller to access an account in the past year, according to the FRB's research. That's the highest level of any channel to access an account.
In addition to doing routine things, like depositing and withdrawing money, some customers prefer to deal with a person for more complex banking issues, according to research from Bain.
Customers' most frequent communication channels to access their bank accounts
It's also important to consider how frequently people avail themselves of branches and not just whether they use branches in general. From 2013 onward, the proportion of people who frequently used branches for their banking declined dramatically, as other channels grew in popularity. There's also reason to believe that mobile banking has emerged as a substitute for online banking for a proportion of households.
But these preferences aren't uniform across populations. People who prefer using bank tellers more frequently are more likely to be older, live in rural areas, and have lower incomes. They're also more likely to speak Spanish.