The Wall Street Journal reported on the strategic shift of U.S. banks from traditional branches to bolstering their online banking services.
The newspaper reported that major U.S. banks have started closing branches in significant numbers. According to S&P Global, approximately 2,454 bank branches were shut down over the past year.
By December 2023, the number of bank branches in the United States has decreased by over 20% compared to 2009.
The newspaper reports that approximately 400 bank branches will close in 2024, including those of Bank of America, JP Morgan Chase, US Bank, Capital One, PNC, Wells Fargo, and TD.
According to the Office of the Comptroller of the Currency, which regulates US national banks, Wells Fargo Bank has led the list with at least 88 branch closures since the start of the year.
What’s behind it?
“Rising interest rates have led to a decrease in bank profits, possibly resulting in the closure of more local bank branches,” explains Nathan Stovall, head of financial institutions research at S&P Global.
He noted, “Banks have recognized that their physical presence no longer needs to be as extensive. As revenue pressures persist, it is likely that banks will continue to downsize their branch networks.”
Experts believe that banks are enhancing their online services by offering them at lower fees and improving digital banking applications. These applications often allow for faster and more convenient transactions via mobile phones.
“The range of services available at bank branches is diminishing,” observes Jim Perry, a senior strategist at Market Insights.
While online banking offers numerous benefits, some individuals, such as small business owners, do not find the idea of eliminating physical branches logical, according to the newspaper.
Financial consultant Chuck Failla advises, “For a neighborhood restaurant owner, it’s more prudent to deposit the day’s earnings at the bank personally rather than hire an armored car service for pickup.”
He notes that individuals who often need to exchange foreign currencies might also prefer the option of visiting branches in person.
However, these scenarios may become less common as technology continues to advance and offers more convenient solutions. Additionally, with the rise of digital currency and non-traditional banking options such as fintech companies. The need for physical bank branches may continue to decrease.
However, while banks are shifting focus towards online services, it is important for them to also consider the needs and preferences of their customers. Some people may still feel more comfortable with face-to-face interactions and the reassurance of a physical location.
