Retailpocalypse: Bank branches are closing in droves

There may be no physical institution as historically revered as a bank. Community centers and trusted destinations, the banks of our imaginations are cool and quiet spaces housed inside classical limestone buildings. Ceilings are high, floors are marble; words echo. Behind bronze-framed windows, tellers take money from trusting customers for safekeeping or direct them to comfortable chairs where they wait for a personal banker.

Nice try. Banks these days are hardly elegant or imposing. Most have shrunk in size thanks to rising costs of real estate, and many have disappeared entirely, according to data from the Federal Deposit Insurance Corporation. Chase reduced its branch presence by 190 locations, a 3.4 percent decline, from 2012 to 2016. Wells Fargo closed 98 branches, a 1.6 percent decline in the same period. Its peers are even more aggressive. Bank of America closed 243 branches (16 percent) in that period and Citi closed 302 (28.5 percent).

Branches are consolidating locations with lower servicing volume, opening in higher growth areas and renovating existing branches and ATMs. More importantly, they’re evolving into more compact, digitally oriented spaces that incorporate new technology and help branch employees focus on improving the customer experience.

Some end up looking more like Apple Genius Bars than banks.

Citibank’s new digital branches, for example, each feature a workbench with computers where customers can look at their finances with a personal banker at their side. Staffers, equipped with iPads, are available on the floor. While the teller behind the window used to be the standard, it is now seen as an inconvenience. This so-called “banking side-by-side,” however, is thought to be a luxury, and banks like Citi want to make it the norm.

“We have personal bankers here, a manager, head tellers – we have everything a traditional branch has but we’re serving [customers] in a more convenient way, and in a better way, really,” says Solymar Difo, head teller at a Citi digital branch in Miami. “Behind the teller line, there wasn’t much we could do. … You might tell them they have to wait for a personal banker, but then the personal banker is caught up opening accounts or doing other things that this client here in front of you doesn’t have time to wait for.”

Traditionally, the role of a branch teller has been a demanding one for such an entry level, frontline job. Many tellers are often straight out of college. They have to learn about the many different financial products they sell, when to identify a sales opportunity that would require a personal banker and how to quickly sell the idea to a customer to get them to that banker.

In digital branches, however, “there’s not a barrier between you and the client,” Difo says. “Instead of directing them to see a personal banker or make a call [or] go online … I have the opportunity to do all three [myself]. I can educate them, help them online, I can even make the phone call with them.”

While those in the banking industry feel there will always be brick-and-mortar branches, in large part because the business of banking is grounded in trust, and in knowing the person with whom you’re working, the move to digital technologies is expected to grow exponentially.

“Today, four out of every five monetary transactions are completed through our self-service channels, but we still see meaningful opportunities for improvement,” Thasunda Duckett, JPMorgan Chase’s consumer banking CEO, said at the company’s Investor Day in February. “Last year, we had over 400 million transactions being completed through our tellers, 70 percent of which could have been done through our self-service channel. So in the year ahead, you’re going to continue to see us focus on migrating more of these transactions to digital.”

Five charts that show how physical bank branches are here to stay

Despite all the worry (or excitement) about banks getting rid of branches, banks aren’t getting rid of branches.

Sure, they’re reducing the number of branches and using the remaining ones in a way that’s more in line with consumer behavior in a digital world. But branches remain one of the most important parts of their business, particularly outside of major cities and urban areas. And, despite many young people’s inclination to do most of their banking digitally, having a branch and ATM presence is still a big factor in where they decide to bank, even if they never use them.

“It’s becoming increasingly clear that banks that can get the balance right between digital and personal interactions will be those that build the strongest customer relationships,” said Jim Miller, senior director of banking for J.D. Power.

The following five charts show that while non-traditional branchless banks like Ally Bank and Capital One 360 have an edge over brick-and-mortar branches, both are equally important to customer experience and satisfaction.

Banks are improving digital strategy, but digital-first banks have happier customers
J.D. Power’s most recent Canadian retail banking satisfaction report shows that a well-executed online virtual business model leads to higher customer satisfaction. Canada’s largest banks led the customer satisfaction index rankings, each with scores over 750 on a 1,000-point scale. Midsized banks performed only slightly better. Tangerine, the digital lender owned by Bank of Nova Scotia, still outperformed them all, with an index score of 840.

Bank customers are still using tellers, ATMs and the telephone
More people may be using mobile banking apps — and usually, all they’re doing is checking balances — but branches and call centers are still handling high levels on routine transactions: depositing, withdrawing and transferring funds. Last year, for example, 90 percent of customers visited a teller in the third quarter and half called their bank, according to a Bain study on transaction migration.

customers still use ATMs, tellers, phone

And it’s not true that older people are less open than the young to mobile or digital banking, according to Bain. They’re half as likely as the youngest group to bank on mobile or web browser, but ATM and phone use falls off among the older segment and that they’re just as likely to bank online suggests they’ll embrace mobile when the circumstances are right. And older respondents have rated their banking experiences on smartphones or tablets highly, more so than younger customers, who tend to be critical of app quality, appearance and functionalities.

Customer satisfaction is highest in branch visits, but also the least consistent
Among the channels measured for interaction satisfaction, branches had the highest performing with a high score of 927, but they also ranked lowest in satisfaction, with a low score of 813. That means there was a 114-point difference between the two. Mobile however, had the shortest range, with a high of 898 points and a low of 842.

The figures show how much further banks need to go in making customer experiences consistent across all channels. To do that, they’ll have to define the expectations for experience, train frontline staff on key behaviors, track performance and reward employees who meet expectations.

Tellers are often a last resort


Sometimes there are hidden fees, sometimes there are privacy issues. But many people resort to tellers because other channels proved too difficult, Bain found. The line was too long, the ATM was taking too long, there were access issues with their login information or they didn’t have their bank card. More than 70 percent of transactions failed or were abandoned simply because the experience was too complicated.

Mobile banking growth is plateauing 

Mobile banking has plateaued in most countries, but it actually declined in China, which is probably at least in part to do with the fact that Chinese customers have so many financial services available through its mobile payments platforms.


The number of consumers that use their bank’s mobile app leapt from 32 percent in 2012 to 52 percent in 2015, according to Bain, then to 55 percent in 2016. That shows that early adopters — ahem, “millennials” — have already adopted. Older customers like digital banking and may soon embrace mobile. Branch users still need to be convinced.

Hi 5! The top five fintech stories we’re following today

top 5 weekly fintech stories

Between tailgating at a pre-game party or watching the Super Bowl itself, you may not have had enough time to really dig into the week’s top news. As the halo burns off the big game weekend, regain focus by feasting on the best of Tradestreaming’s weekly coverage.

Inside Chase’s 10-person newsroom

Banks are creating in-house financial news with the hope consumers will forgo that click to Forbes or Yahoo Finance and instead spend more time reading personal finance articles on their own websites. Here’s an inside view into Chase’s newsroom. While this type of content targets readers looking for money help, it is heavily branded and intended to keep bank products in front of customers.

Recent headlines include “Why you should stop comparing your finances to your friends,” “Can money buy happiness?” and “The best times of year to buy a car” – the type of service articles that could easily be found on any number of media sites.

Retailers struggle with mobile payments

Apple, Google, and Samsung have made major investments in payments. Large banks, too. Everyone’s hankering to make retail payments faster and safer – except retailers. For the most part, they’re finding the upgrade to new technology a major hurdle. Oh, and because they’re not seeing a surge in consumer demand to use things like Android Pay and ApplePay, retailers are in no rush.

“Retailers may be looking into the future as opposed to implementing for today,” said Morgan McAlenney, evp of The Integer Group’s digital arm. “A lot of these technologies of the last few years are transition technologies — from QR codes to digital coupons — a lot of these things are transitioning us to a future state we haven’t yet defined.”

Trulioo’s Stephen Ufford: Regtech is sexy

Trulioo's CEO and cofounder Stephen Ufford

Far from just preventing financial firms from straying too far afield, regulatory technology can be an enabler, incorporating billions of new people into the global financial system. On the Tradestreaming Podcast, we talk to Trulioo’s Stephen Ufford about why he thinks regtech is the sexiest part of fintech.

“We think about how we can help businesses trust individuals enough that they can lend to them,” he said. “We’re covering 4.5 billion people right now. That means that there are people in emerging markets, through all these tools, who can borrow money to start a small business. Those small dollar loans have been proven to impact generations to come. To me, that’s sexy.”

Getting customers out of the bank branch

Mobile banking adoption is plateauing and banks are looking for new ways to get people out of their high cost branches. ATMs are a key tool for banks to get customers to service themselves, but they’re not the end-all be-all. ATMs can’t handle very common transactions that people still wander into a branch to take care of.

While early adopters have taken to mobile banking, financial institutions will need to more actively shepherd the rest of the population to take up the digital channel. In fact, there may be a few stops along the way. Here are three technologies to help get the rest of the population using technology channels.

WTF is proptech?

There are billions of investment dollars flowing to new technologies targeting the real estate industry. From new online financing options to property management tools, proptech is poised to change the way we buy, sell, and manage real estate.

Proptech is predicated on connecting various pieces of the property market, so that participants in the real estate ecosystem (think buyers and sellers but also brokers and lenders) can make better decisions with less friction.

Where have all the branches gone: Citi explains

bank branch closures

In most of the world, it’s getting harder to find a local bank branch.

That’s because financial institutions are finding it increasingly harder to rationalize keeping them open. As more consumer financial activity moves to mobile and to the web, banks are shedding branches the world over.

Some recent branch closure announcements include:

  • JPMorgan slashed 195 offices, PNaC closed 94, and Bank FAmerica 88 in 2015 (BizJournals)
  • HSBC, RBS, and Barclays plan to close 400 branches in the UK (Reuters)
  • Banco Santander plans to close 450 branches in Spain (BBR)
  • Lloyds Banking to cut 29 branches (The Guardian)

Overall, there are 1,614 fewer bank branches in the United States today in early 2016 than there were a year ago.

What we know

As more national and regional bank chains in the EU and the US close local branches, the trend is set to accelerate, according to a recent report published by Citibank’s Global Perspectives and Solutions group. In Digital Disruption: How Fintech is Forcing Banking to a Tipping Point [.pdf], the authors forecast that the incumbent branch networks may reduce their physical footprints by up to 50 percent by 2025.

bank branch closure forecast to 2025

Indeed, as more consumers migrate digitally to do general banking activities, banks with large branch footprints are working rapidly to stem the damage. According to the report, European customers are taking up digital banking channels in greater numbers compared to American bank clients. And banks are responding similarly — European financial institutions are closing retail locations more quickly than their American peers. Nordic banks may have already reduced their branch count by 50 percent.

What’s the future of the branch

Most incumbent banks believe there’s still a valuable role for bank branches even as customers spend less time in them. A few bulge bracket banks recently discussed the topic of branch closures on their recent earnings calls. Some banks have chosen to experiment with new formats for their local presences. Much like the evolution of physical books stores, these consumer financial institutions are playing around with the idea of using their locations as social meeting places. For example, Virgin Money is remaking its branches into “lounges”, where customers can chill and get coffee.

Others, like Bank America, see the writing on the wall. It’s using its branches and newly-appointed “digital ambassadors” to educate customers inside their branches on the various digital options at their disposal. Seen from this perspective, the bank is actively encouraging customers to use its digital channels to conduct their business.

For its part, the authors of the Citi report advise banks to take the long view. While customer behavior is changing and tilting in various degrees towards digital, we still have a long way to go. The report recommends banks take a panoramic view on managing their customer touch points:

This [digital] shift in customer behavior is making banks rethink their channel strategy. In our view, an omni-channel strategy is the winning solution for incumbent banks over the next decade because customers interact with their main bank via multiple channels rather than a single channel. The omni-channel strategy should be built around a competitive digital banking offering, a reduced and modernized branch network and lastly, a targeted channel strategy for different segments of customers.

Not all customers are having an easy time saying goodbye to their bank branches: they’re organizing protests in the UK to help protect the elderly who aren’t digital natives. In some locations, local businesses report that they’ve seen a drop in their businesses as their community banks have closed. But there seems to be general consensus that for certain banking transactions, there will always be a need to meet a banker in-person.

Does Wall Street see a future for the bank branch?

the future of the bank branch

With few exceptions, white shoe banks just reported weak Q1 earnings. And it makes sense: Retail financial institutions are in the business of real estate, and it just doesn’t make great business sense anymore to maintain large networks of walk-in branches. The physical spaces are expensive to maintain, and with growing numbers of customers demanding online access to banking services and products, the idea of “going to the bank” appears on its way to becoming obsolete.

But although demand for physical bank branches is falling, it doesn’t necessarily mean that our children will never have the experience of personal, face-to-face contact with a consumer banking professional. Even with 24/7 access to accounts and services from any computer or mobile phone, many customers continue to require in-person support for advice, help navigating automated systems or making decisions about their finances.

Five senior banking industry professionals spoke recently on their firms’ quarterly conference calls about their plans for in-person service.

(All quotes courtesy of Seeking Alpha and lightly edited by Tradestreaming for clarity and space)

Bank America deploys digital ambassadors

Paul Donofrio, Chief Financial Officer at Bank of America

We now have nearly 20 million active users, and deposit transactions from mobile devices now represents 16% of deposit transactions… One way we are [adapting] is by deploying digital ambassadors in our financial centers. Digital ambassadors engage with customers who come to our branches to transact. They educate these customers on alternatives to branch banking which are not only more convenient for them but also less expensive for us.

JP Morgan tries on-demand staffing to ensure optimal service

Marianne Lake – Chief Financial Officer & Executive Vice President, JP Morgan

The head count in the Consumer Businesses is up slightly and that’s a combination of the investments we’re making in technology and digital. That’s about 500 of the heads, and the other 1,500 is increasing part-time staffing in the branches, so that we have flexibility to make sure that we have loading at the right times of day for making sure the customer experience is good.

Citi is reallocating human resources to service centers

Mike Corbat, CEO Citigroup

We also took a repositioning charge in Q1, as part of our effort to make share Citi is appropriately sized and structured for the current environment. We have identified opportunities for greater efficiencies in our regional models including additional delaying and shifting staff to our service centers, which now host more than half of our people. That will drive an additional reduction of headcount, which was down 3% during the quarter to 225,000, or almost 40,000 fewer than when I became CEO.

Wells Fargo thinks it needs more great people

John Stumpf – Chairman and CEO, Wells Fargo & Co

What we need is…more great people to serve more customers.

We want to make sure that we’ve got the right people in positions to do the right thing, where we become an employer of choice for a lots of those activities. Wells Fargo is a very nice place to work. We’ve got a great customer franchise who wouldn’t want to work here in those businesses compared to some of the places that they might be coming from and we’re always adding good people.

PNC is migrating customers away to non-branch channels

Bill Demchak – Chairman of the Board, President, Chief Executive Officer, PNC Financial Services

Within our retail bank, we saw good year-over-year and linked quarter growth in earnings and we continue to see improved efficiency within the business as we execute our ongoing strategy to reinvent the retail banking experience, with more customers migrating to non-branch channels for most of their transactions. [We also see] the expansion over universal branch model.