WASHINGTON–The debate over building and operating more branches isn’t just limited to credit unions; it’s very much alive in the banking industry, which has far more retail outlets than do CUs.
That debate was profiled in a report by Reuters that noted “many U.S. customers are not ready to give up regular visits to their nearest branch, complicating the industry's efforts to slim down.”
Reuters cited FDIC data showing the number of U.S. bank branches has declined by 6% since peaking in 2009, with the 93,283 branches open at the end of 2015.
"Our customers still want to visit us," Jonathan Velline, Wells Fargo's head of ATM and store strategy, told Reuters in an interview. "They're still coming to our stores and our ATMs at pretty consistent rates."
Reuters noted that while bank branches are also being consolidated in other countries, a difference in the U.S. market remains that many U.S. customers still routinely use checks and need branches to process them.
Reuters reported the traditional branch costs roughly $2-$4 million to set up and $200,000-$400,000 per year to operate, according to data from Mercator Advisory Group.
JPMorgan Chase & Co, the country's largest bank, told Reuters each of its branches earns about $1 million in annual profit, but takes a decade to reach its full potential.
John Elmore, vice chairman of community banking and branch delivery at U.S. Bancorp, told Reuters that branches are especially important for small businesses that need to deposit cash frequently, prefer to negotiate loans in person, or want strategic advice.
"Proximity to their business is a very, very important factor to their bank selection and their continuing relationship with a bank," Elmore told Reuters.
Reuters noted the obvious question, of course, is why with so many digital tools available do consumers continue to visit branches. Data show that younger consumers visit branches less frequently, and as they age and generations follow the number of branches will likely continue to be reduced.