JPMorgan, Citigroup, and Wells Fargo permanently shut over 250 branches in the first half of 2021, accounting for around 1%-5% of their networks. This move was in anticipation of the decline in foot traffic in favor of digital channels that occured in 2020 being permanent with further reductions to be expected, even as some lenders continue to expand. However, brick-and-mortar branches still have their value in an increasingly digital landscape, particularly as they help attract new customers.
Wells Fargo takes the lead
Although Wells Fargo had the most brick-and-mortar branches in the US at the beginning of the year, they ended up with the highest number of closures: 154 branches (accounting for 3% of its domestic network and 6% of staff). “Our customers are increasingly leveraging our digital capabilities,” chief financial officer Michael Santomassimo said. “These changes and others have enabled us to adjust branch staffing.” Additionally, Citigroup shut around 100 (or 4%) of its branches globally in the US, Mexico, Asia. JPMorgan, on the other hand, closed nearly 40 branches, accounting for 1% of its network. Only in late 2019 did JPMorgan experience an uptick in its brick-and-mortar branches: its first increase since 2015.
Digital banking is increasingly popular; even customers who may have preferred to bank in-person for loan applications or large transactions were forced to switch to digital platforms during the pandemic. Back in 2018 and 2019, Citi, JPMorgan, and Bank of America revealed intentions to enter new markets in the US and recently reaffirmed these goals. “The difference is that with digital, we can now enter a new market with fewer branches than we did five or ten years ago, and serve just as many customers, if not more,” said JPMorgan. In fact, in the most recent quarter, 44% of all new accounts opened and loan originations were done through digital channels at Bank of America. This was a decline from 47% in 2020, although still higher than the figure of 29% in 2019.
The importance of real-world bank-customer relationships
Although brick-and-mortar banks aren’t as pivotal as they once were, they’re still important for acquiring and retaining customers. To first attract those customers, banks should ensure their premises are professionally maintained. In particular, quality commercial cleaning services can keep the building in tip-top condition and help create positive and long-lasting impressions for customers. Moreover, the existence of brick-and-mortar banks remains an important way for customers to receive advice on complex financial topics. While routine banking activities can be performed online, customers can benefit from visiting their local branch and talking with a personal banker about important and sensitive personal finance issues.
Further job loss expected
Experts have always expected bank branches and jobs to drastically fall due to the increasing prevalence of online and mobile banking. Although Bank of America only had a small number of branch closures in 2021, it ended up letting go of 2,500 staff in the second quarter due to improved “consumer efficiency”, according to chief executive Brian Moynihan. Moynihan, along with other bank executives like Charlie Scharf (Wells Fargo CEO), expect they’ll cut more staff in 2021, although the biggest reductions will be due to retirements or staff leaving — therefore minimizing backlash somewhat .“We have some internal plans,” Moynihan said on job cuts. “But we don’t go out and say that”.
In the years before 2020, major US banks were opening new branches in an effort to increase revenue following the last financial crisis and almost ten years of cutbacks. Now, brick-and-mortar branches, while still valuable, are falling behind the digital channels that are paving the way into the future.