The past year witnessed the closing of the most retail bank branches ever in a calendar year. The net closures in 2021 numbered 2,927. The instant verdict of some is that this signals an acceleration in the obsolescence of branches. I beg to differ.
Whether these closures were primarily the result of a pandemic or simply “sped along” by it is debatable. I’ve suggested the latter to bankers over the past year. Most of the moves we’ve seen by larger banks were not conceived in emergency meetings during the first quarter of 2020.
Sure, things like work-from-home teams, travel restrictions, closed lobbies, plexiglass dividers, social distancing arrows on floors, hand sanitizer stations, etc., weren’t in the plans. Most were on-the-fly adaptations.
However, the banks who made the more aggressive consolidation moves recently have had these plans on the drawing boards for some time. An unforeseen pandemic was not the driving reason behind these moves.
With that, I’ve been interested by the responses I’ve gotten from community bankers during the last year when discussing big-bank branch closures. In years past, branch closures tended to create at least some anxiety.
Community bankers wondered if big banks closing locations signaled that branches may no longer be the centers of the banking universe. Were branches truly to become obsolete?
In recent times, however, most community bankers I speak with see nothing but benefits as large competitors close locations in their markets. Yes, technology has allowed these big banks to do a better job of retaining customers as their primary branches close.
Yet, big banks’ branch closures almost always put numerous consumer and small-business relationships in play for proactive competitors.
One bank president shared, “The big banks may be ‘overbranched.’ We aren’t. I may not need more branches in existing markets, but competitors closing some of theirs is good news to us.”
It should also be noted that closings in recent years seldom signaled that these larger banks were closing all branches in the affected markets.
In fact, most leaders I speak to at some of the larger operations that have been paring branch networks seem as convinced of the importance of physical branches as ever. Branch designs are evolving, and service areas are expanding, but they remain central to customer relationships and the growth prospects of individual markets.
It should be noted, as well, that while the net number of branches was down by a “record” amount, over 1,000 new branches were opened in 2021. How many industries opened 1,000 new locations during a pandemic year? Not many.
I have respectfully suggested to bankers in recent years that talk of a branchless future has long been oversold. For the rest of their careers and at least several generations to come, if there are banks, there will be branches. Their primary roles will continue to evolve, but the benefit of physical locations and talented, accessible bankers remains.
On that topic, I continually remind leaders of a basic fact: Customers do not visit branches. They visit bankers.
We are well past the time in which most customers can’t avoid a visit to a branch to handle the great majority of their banking transactions. Most banks have reached a point in which even rather complicated transactions can be handled remotely.
There is a difference, however, in being able to handle something a certain way and desiring to handle it a certain way. As an example, in the middle of mass branch lobby closures, many banks’ drive-up lanes saw record customer traffic.
Was that method easier than the “bank anywhere” digital options available to customers? In most cases it was not. But the drive-up windows still offered physical, face-to-face access to a banker (albeit at a distance and behind glass).
And as lobbies have opened, traffic has returned at a pace and to a level that has surprised many. They were told that customers likely would not return to branches. Yet, even in markets with strict restrictions, branch traffic remains strong for most.
Branches continue to be the anchor of most customer relationships and the bankers within those branches are, themselves, vital elements of banks’ products. To wit, to many customers, their bankers don’t simply deliver products. They are the product.
That fact is obviously important to senior leadership. I would suggest, however, that it is important for leaders to clearly and consistently remind branch teams and the people who support them of the critical roles they play in the future of banking.
Headlines can be accurate, yet not tell the full story. Talented and loyal team members within your branches are as vital today as ever to your business and its future. Make sure they hear the full story.
