Taylor Scott
The COVID-19 pandemic has had a significant impact on banks, with many branches closing or reducing their hours. In 2021, banks closed nearly 4,000 branches as consumers turned to electronic banking options. This trend was already in motion before the pandemic, with banks steadily reducing physical locations over the past decade. However, the health crisis has accelerated the shift towards digital banking, with banks weighing the decision to reopen branches even as the threat of the virus subsides. While some banks have temporarily closed lobbies and asked customers to use drive-through lanes or digital services, others have permanently shut down branches, leaving some communities without easy access to financial services. The move towards digital banking has been a challenge for some customers, particularly those who rely on physical branches for their banking needs.
| Characteristics | Values | |
|---|---|---|
| Number of bank branches closed in 2021 | 4,000 | |
| Number of Wells Fargo branches closed in 2021 | 221 | |
| Number of new bank branches opened in 2021 | 1,000 | |
| Net loss of bank branches in 2021 | 2,927 | |
| Percentage change in number of bank branches in Massachusetts between June 2019 and 2020 | Largest in the US | |
| Number of branch locations in 2019 | 95,000 | |
| Number of branch locations in 2010 | 83,000 | |
| <EOS_TOKEN> | Characteristics | Values |
| --- | --- | |
| Number of branches opened in the second quarter of 2020 | 210 | |
| Number of branches opened in the first quarter of 2020 | 247 | |
| Number of branches opened in the fourth quarter of 2019 | 427 | |
| Average closure-to-opening ratio from the second quarter of 2017 to the fourth quarter of 2019 | 2.4 | |
| Closure-to-opening ratio in the second quarter of 2020 | 1.8 |
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What You'll Learn
Banks closed 4,000 branches in 2021
The COVID-19 pandemic has had a significant impact on bank operations, with a notable shift towards electronic and digital banking services. In 2021, banks closed approximately 4,000 branches across the United States, according to a report by Global Market Intelligence. This move away from traditional brick-and-mortar locations has been influenced by several factors, including the increased use of mobile banking applications and competition from online banks and payment systems such as PayPal.
The trend of bank branch closures is not unique to the pandemic era. In fact, banks have been steadily reducing their physical locations over the past several years. Between June 2020 and June 2023, there was a net loss of 6,458 bank branches in the US, with Hawaii, Oregon, and Virginia experiencing the most significant share of closures. This represents a 7.9% decrease in the total number of bank branches across the country.
The shift towards digital banking has been influenced by changing consumer preferences and advancements in technology. A survey by Bankrate found that 77% of Americans prefer online digital banking, while other surveys suggest the figure could be as high as 89%. Additionally, the cost-per-transaction for in-person banking is significantly higher at $4.00 compared to only $0.04 for digital transactions.
While the closure of bank branches may be driven by economic factors and changing consumer behaviour, it is important to consider the potential impact on customers. In some cases, bank closures have left communities without vital services, particularly in rural areas where access to banking may already be limited. As a result, customers may face inconveniences and challenges in accessing their financial services.
Despite the trend towards digital banking, there are still concerns about the rising number of physical branch closures. Some customers, particularly senior citizens, may be resistant or less familiar with digital banking platforms. Additionally, with over 200 million Americans still depositing cash, the reduction in physical branches could result in longer lines and a potential decline in the quality of service.
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Customers are turning to electronic banking
The COVID-19 pandemic has accelerated the shift towards electronic banking as consumers increasingly turn to digital channels and electronic payment methods. In 2021, banks closed nearly 4,000 branches in the US, while Canadian banks also reported a rapid increase in digital transactions. This trend is not entirely new, as banks have been steadily reducing physical locations over the years. However, the pandemic has undoubtedly hastened this transition.
During the pandemic, banks have witnessed a record shift towards digital banking. For instance, the Bank of Montreal in Canada observed a surge in self-serve transactions, with the proportion of overall retail transactions increasing from 89-90% before the crisis to about 95% during the pandemic. Additionally, the number of customers signing up for digital banking services rose by up to 300% in just four weeks, indicating a significant and lasting change in consumer behaviour.
The increased use of mobile apps and the emergence of online banks and payment systems have contributed to this shift. The convenience, speed, and efficiency of conducting financial transactions from home have appealed to customers. While some, especially senior citizens, may be resistant to change, banks are committed to helping their customers adapt to these new methods.
The pandemic has also prompted banks to redeploy their workforce, with tens of thousands of employees, including capital markets staff, working remotely. This shift to remote work has been made possible by significant investments in technology. Canadian banks, for instance, have spent over $71 billion on technology since the last financial crisis, anticipating that their clients would eventually embrace digital solutions.
While the move towards electronic banking has been accelerated by the pandemic, it is worth noting that cash is still prevalent, and banks continue to adapt their services to meet the needs of all their customers.
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Banks are weighing whether to reopen branches once the COVID-19 threat subsides
The COVID-19 pandemic has accelerated the shift towards digital banking and away from in-person services. During the pandemic, banks closed nearly 4,000 branches as consumers turned to electronic banking. JPMorgan Chase, for instance, closed 20% of its branches to help curb the spread of the virus. Most banks reduced hours and staffing during the outbreak.
However, banks are now considering whether to reopen these branches as the COVID-19 threat subsides. While some banks have not yet provided details about their future plans, others are reopening branches with new services. A Bank of America spokesperson, for example, said more information was likely to come in the following weeks. JPMorgan Chase, meanwhile, has been expanding its physical presence with branches as part of a nationwide expansion plan.
Some experts argue that physical banks will continue to exist but will look and operate differently as digital banking gains popularity. Steve McLaughlin, founder of FT Partners, an investment banking firm focused on financial technology, notes that branches could shrink and become smaller two-person offices instead of large spaces with numerous tellers.
While the shift to digital banking was already occurring before the pandemic, the health crisis has accelerated this trend. A survey by Bankrate found that 77% of Americans prefer online banking, while other surveys place that figure at 89%. The convenience, efficiency, and speed of digital banking options have driven this shift, with banks also investing more in technology upgrades.
As the pandemic subsides, banks will need to decide whether to reopen closed branches and what services to offer in their physical locations. The trend towards digital banking is expected to continue, and banks will need to adapt their physical presence to meet the changing needs and preferences of their customers.
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The pandemic accelerated the pace of closures
The COVID-19 pandemic has accelerated the pace of bank closures. In 2021, banks closed nearly 4,000 branches as consumers turned to electronic banking. This is a notable increase compared to the average closure-to-opening ratio of 2.4 from the second quarter of 2017 to the fourth quarter of 2019. The pandemic has highlighted the convenience and efficiency of digital banking options, with many customers utilizing mobile apps, online banks, and payment systems such as PayPal.
While some banks have temporarily closed lobbies and asked customers to use drive-through lanes, ATMs, and electronic transactions, others have permanently shut down branches. Wells Fargo, for example, closed 221 branches in 2021, more than any other bank. Bank of America also closed its branch in Brisbane, leaving the town without any physical banking services.
The trend towards digital banking was already underway before the pandemic, with banks steadily reducing their physical locations. However, the health and safety concerns brought about by COVID-19 have accelerated this shift. Rodger Levenson, CEO of WSFS Bank, noted that the pandemic provided an opportunity to close physical locations and move towards a digital-only model.
While some customers, especially senior citizens, may be resistant to the change, banks are working to assist them in adopting digital banking tools. The pandemic has expedited a years-long trend towards digital banking, and it remains to be seen how many physical bank branches will remain in the post-pandemic era.
In summary, the COVID-19 pandemic has undoubtedly accelerated the pace of bank closures and the transition to digital banking. The economic and social impacts of the pandemic have forced banks to reevaluate their business models, and many have found that physical branches are no longer necessary or desirable. As the industry adapts to new consumer behaviors and preferences, the number of bank closures is likely to continue rising, even as the pandemic subsides.
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Customers are adapting to a new normal where digital is the only option
The COVID-19 pandemic has accelerated the transition to digital banking, with banks closing physical branches and customers increasingly adopting electronic banking options. This shift towards digital is evident in the significant increase in the use of mobile banking apps and online banking services during the pandemic. While banks have cited the need to prioritize the health and safety of customers and employees, the trend towards digital banking was already well underway before the pandemic.
The pandemic has served as a catalyst for banks to embrace digital transformation and accelerate the closure of physical branches. In 2021, banks closed nearly 4,000 branches across the country, with Wells Fargo and Bank of America being notable contributors to this trend. This move towards digital-only options has been met with mixed reactions from customers. Some customers, particularly senior citizens, have expressed resistance to change and a preference for traditional in-person banking services. However, banks have been working to address these concerns by providing assistance and guidance to customers who may be less familiar with digital banking platforms.
The shift to digital banking has also brought about changes in the types of services offered by banks. Branches that remain open are likely to provide a different set of services compared to the traditional deposit and withdrawal transactions. Customers are increasingly turning to digital platforms not just for basic transactions but also for financial services and advice. This evolution in customer preferences and expectations is reshaping the way banks operate and interact with their customers.
While the pandemic has accelerated the transition to digital banking, it is important to recognize that the trend towards digital was already in motion. Banks had already been reducing their physical locations and expanding their digital presence before COVID-19. The pandemic has simply expedited this process, forcing both banks and customers to adapt to a new normal where digital is the primary, if not the only, option for banking services.
As the banking industry continues to evolve in the post-pandemic era, it remains to be seen whether physical branches will regain their prominence or if digital banking will become the predominant mode of operation. Banks will need to carefully consider the balance between physical and digital presence, taking into account the needs and preferences of their diverse customer base. Ultimately, the "new normal" in banking may involve a hybrid approach that leverages the convenience of digital platforms while still providing personalized services through select physical locations.
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Frequently asked questions
Yes, banks across the industry are closing branches and limiting services due to the coronavirus pandemic.
Banks are closing branches to limit contact between customers and employees and to prevent the spread of the coronavirus.
While banks state that closures are temporary, some industry watchers are skeptical. The coronavirus pandemic has accelerated the shift towards digital banking, and it is unclear whether banks will reopen all their branches once the threat subsides.
Customers are encouraged to use digital banking tools, drive-through services, ATMs, and contact centers. However, limited access to physical bank branches may inconvenience those who rely on in-person services.
While the coronavirus pandemic has slowed branch openings, some banks, such as JPMorgan Chase, continue to expand their physical presence through mergers and acquisitions.
