We project branch usage by US consumers will drop at a compound annual growth rate of -2.01% from 2019 to 2024, based on FDIC and Javelin data.
Banks are slashing their branch networks to reduce costs and stay relevant — but they should proceed with caution. Factors behind the falling number of branches include shifting consumer preferences for digital banking , as well as many incumbents' desire to cut operating costs by reducing their physical infrastructure and in-branch headcount as automated banking options proliferate.
However, it's worth noting that for many incumbent banks, branches remain an invaluable source of revenue. At Chase, for instance, the vast majority of its customer transactions are completed through self-service channels, but a massive 70% of its deposit growth between 2014 and 2018 came from households that frequent branches.
Banks can have their cake and eat it too, if they adapt their branches for the digital age. Some leading financial institutions are actually expanding their branch networks, indicating that they still see value in this channel. For the investment to pay off, banks should introduce digital elements to their branches., which is designed to make it easier for consumers to handle transactions within branch lobbies, drive-thrus, or other locations without a teller.
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