WASHINGTON–The Federal Reserve Board has released “Perspectives from Main Street: Bank Branch Access in Rural Communities,” a report that examines how rural consumers and small businesses use bank branches and how their communities have been affected by branch closures.
Of the counties analyzed in the Fed report, more than half lost bank branches between 2012 and 2017, with some predominantly rural counties experiencing what the report described as significant declines. Those counties are typically less well-off economically and also had a greater proportion of minority residents relative to other rural counties.
The Fed said the report is based on information gathered during “listening sessions” hosted by various Federal Reserve Banks across the country between July 2018 and January 2019. The sessions included feedback from consumers, small business owners, and local government officials and others who told the Fed they have found local or technological substitutes for many, but not all services provided by branches, and that the alternatives are usually more costly and less convenient.
Why People Prefer Branches
The Fed report further suggests that despite the increasing use of digital methods to access financial services, branches continue to be important for certain services, such as submitting loan applications, making deposits and withdrawals and resolving issues. Small business owners indicated a preference for local banks to access financial services, which they believe may offer them greater credit availability and more favorable credit terms. Furthermore, small business owners showed concern that loan product costs and terms were not always transparent when they have turned to online lenders.
According to the Fed, the research reviewed also found that adoption of digital banking services has been more gradual among consumers who are older, have lower incomes or fewer years of formal education, or who live in rural areas. This lower adoption rate suggests that bank branch closures may present greater challenges for these individuals, the Fed said.
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