Why Bank Branches Are at Risk for Disappearing (but Will Never Go Away Entirely)

NEW YORK (MainStreet) — Bank branches are disappearing from the financial services landscape, but will they go away entirely?

With a 40% decline in U.S. bank branches since 1991 and a projected continuing decline of 25% by 2018, according to banking industry business intelligence firm FMSI, it's a fair question to ask. In a wide-ranging study, FMSI says the drop-off in branches may prove to financial institutions that keeping bricks-and-mortar local banking centers running isn't sustainable or cost efficient.

"Our study reveals a declining branch transaction trend of which senior management at financial institutions should take note," says W. Michael Scott, chief executive at FMSI. "With transactions dropping and staffing levels remaining the same, the inevitable outcome is costly overstaffing in the branch environment."

Obviously, the rise of online and mobile banking has taken a toll on bank branches, but that's not the only reasons for the decline. "We suspect this trend has to do more with the market correcting itself from an over-branched environment, as opposed to alternative channels replacing the branch," the report says. "Regardless, online and mobile banking are on the rise, with no signs of letting up."

FMSI analysts aren't sold on the notion of branches drying up completely. Instead, they see banks morphing their branches eventually from deposit centers into sales centers. "The complete transformation of the typical branch to a more sales-centric operation will not happen in the near future," FMSI reports. "Today, the significant majority of interactions in the branch are still simple deposits and withdrawals."

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