The Future of Branches: Death, Diminished Value, or Still Relevant?

Analyst: Bill Bradway

July 30, 2010

Over the past 15 years, a number of industry prognosticators have made claims or forecasts about the demise of the relevance of the bank branch office due to the rise of other channels, lead by the Internet or the changing behavior and needs of the retail customer. Industry consolidation and economic pain and uncertainty have clouded the outlook for growth and are testing the long held assumption that “face time” between customers and bank staff is essential to building a productive relationship for both customers and banks. This analysis covers the outlook for branches, the retail channel eco-system (e.g., branch, ATM, online, mobile), and how interactions between institutions and retail customers are changing.

Since the calendar turned to Year 2000, banks have added a net of 17,247 offices, raising the industry total to over 90,000 branches, while the total number of institutions declined by about 1,700. On the credit union front, the trend for the past few years is similar: a total of 4,750 offices have been added in just the past three years while the number of credit unions has declined by about 808 during this same time period.

• When will the industry stop expanding its branch networks?
• How will online and mobile channel innovations and enhancements affect the branch?
• How can banks and credit unions justify spending on all of these channels?
• Has the focus changed from “The Branch of the Future” to “The Future of Branches?”

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