In the past year, thousands of bank branches have closed their doors for good. It’s a trend that could have a significant impact on small-town America, some experts say.
JP Morgan Chase, the biggest lender in the United States, recently announced it is closing about 300 branches (5 percent of its total) in an effort to trim costs, Bloomberg reports. JP Morgan also slashed its number of ATMs by 12 percent in the fourth quarter of 2014.
And it’s not alone. Bank of America closed nearly 150 branches last year, according to CNBC. Those were among more than 2,600 bank branches that were shuttered in 2014.
“The trend, which has branches at their lowest aggregate level in at least eight years, has come about due to a plethora of reasons: A surge in mergers and acquisitions, primarily concentrated in regional banks but recently spreading to larger ones; the move to e-banking where customers can do most of their tasks either online or at automated tellers; and the economics of a low-interest-rate narrow-yield-curve environment that makes it less profitable to be spread out,” CNBC added.
According to the Pittsburgh Tribune-Review, closing traditional bank branches and moving solely to mobile banking services and ATMs can have a dramatic impact on low- and moderate-income communities.
A branch closure is more than an inconvenience to depositors, critics say. It shakes the financial underpinnings of a local economy by making it more difficult for residents to manage their money, apply for loans and cuts off opportunities for financial literacy.
“I think this is a class war,” said Mark T. Williams, a banking expert at Boston University and former bank examiner for the Federal Reserve.
Although banks are required to notify federal regulators, including the Office of Comptroller of the Currency, the Federal Reserve Bank and the Federal Deposit Insurance Corporation, of branch closings, the regulators can’t stop a branch from closing its doors, the Tribune-Review added.
24/7 Wall St. said having a brick-and-mortar location to serve customers is simply a “dying business.”
The five largest banks based on retail locations have a total of over 23,000 locations. As with any retail business, some locations are more profitable than others. Some almost certainly lose money. That makes maintaining a large branch system financially untenable.
Closing bank branches is a way for financial institutions to improve their margins, 24/7 Wall St. added.
It’s estimated that nearly half of Americans solely use mobile banking. I do a lot of my banking online, but I still visit our community bank at least a few times a month.
Living in a small community and hearing about the thousands of bank branch closures over the past year makes you wonder what it would be like to live in a community without a physical bank branch. There’s something about walking into a bank and having someone there to help you. You can’t replicate that experience using an ATM or mobile banking.
Have you had any bank branch closures in your community? Share your comments below or on our Facebook page.
One way that banks make money is by charging their depositors fees. Here’s a look at what it might be costing you, and how to avoid paying more than you should: