The Branch Puzzle: Why Are there Still Bank Branches?

Abstract

We provide evidence that the persistence of the large number of local bank branches across the country may be due to the fact that both depositors and small businesses continue to value local bank branches.

Bank Branch Access: Evidence from Geolocation Data

“…Despite advances in mobile and online banking over time, the proportion of respondents citing branch locations as their most important reason has remained roughly the same since 1989 (between 43% and 49%). Also, from the 2016 SCF, of the 84 percent of households with bank accounts who reported visiting a branch in the past year, almost all did so to use services other than just an ATM (Anenberg, Chang, Grundl, Moore, and Windle 2018).…”

“…A 2020 survey from the financial advisory firm Novantas found that most respondents wanted their banks to maintain branches close to where they live or work, and 70% of consumers felt having a branch nearby was important (Cocheo 2020). Community Reinvestment Act disclosures also reveal that nearby branches are still vital for small business borrowers, as the share of loans made by lenders without a local presence, while increasing, remains low (Anenberg et al 2018).…”

“…Branches remain significant sources to attract bank deposits: JP Morgan Chase, for instance, saw 75% of its deposits growth in 2018 arising from customers using branches (Wathen 2018). Although the number of branches in the U.S. has been declining since 2013 (Anenberg et al 2018), many financial institutions think of branches as salient "billboards" to consumers, and banks are reluctant to close their physical presence entirely in communities, in part because they lose information about the local economy (Nguyen 2021). To enhance the branch experience and draw customers in, several commercial banks are making large investments in redesigning their physical locations into upgraded "smart branches" that integrate with new technologies and amenities (Dallerup, Jayantilal, Konov, Legradi, and Stockmeier 2018).…”