Physical Branches Have Staying Power, FDIC Study Says

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WASHINGTON — Physical branch banking continues to have a strong presence in the industry despite the advent of technologies allowing customers to access services remotely, the Federal Deposit Insurance Corp. said Thursday.

The new FDIC study said although the overall number of branches has fallen 4.8% since peaking in 2009, the per-capita amount of offices still remains higher than any time before 1977, when non-branch technologies were introduced.

In 2014, there were 2.9 bank branches per 10,000 people, higher than the 2.2 figure recorded in 1970, the study said. While the population has grown 56% during that time span, the rate of branch growth over that period has more than doubled, increasing by 109%.

"New technologies have certainly created convenient new ways for bank customers to conduct business, yet there is little evidence that these new channels have done much to replace traditional brick-and-mortar offices where banking relationships are built," Eric Breitenstein and John McGee, both analysts in the agency's research division, wrote in the study. "Convenient, online services are here to stay, but as long as personal service and relationships remain important, bankers and their customers will likely continue to do business face-to-face."

Still, the FDIC research found that technological innovations such as automated teller machines, online banking and remote deposit capture have led to fewer transactions being processed at physical branches.

The agency cited recent research showing bank teller transactions falling 45% between 1992 and 2013. Data also points to credit and debit cards being more common than writing a check. For example, the Federal Reserve Board found that paper checks accounted for only 15% of noncash payments in 2012.

"By contrast, universal credit and debit cards accounted for 58 percent of noncash payments in 2012, up from 38 percent in 2003. The total number of noncash transactions grew by 50 percent from 2003 to 2012, as the number of checks written declined," the FDIC study said.

The researchers suggested the trend away from bank teller transactions is likely to continue as a younger demographic more willingly adopts non-branch technologies. The FDIC said a recent survey showed that only 19% of people between the age of 18 and 29 visited a bank or credit union branch within the previous week compared to 29% of people between 30 and 49.

The FDIC also found that bank branch offices at community banks tend to be more stable because of their reliance on relationship banking. From 1994 to 2014, community bank charters declined 45% and non-community bank charters fell 71%. But the number of community bank branch offices fell just 6.5% during that time, while non-community branches increased 36%. The result was that the average bank office network rose from 3.2 offices in 1994 for community banks to 5.5 in 2014. The average number of offices operated by non-community banks shot up from 26.4 to 123.5.

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