Fewer and fewer bank customers are visiting branches to make a deposit or cash a check, and their proclivity to bank virtually will exacerbate the challenges landlords already face repositioning vacant commercial space.
Banks had been trimming their fleet of branches for years before the novel coronavirus upended the U.S. economy, as customers migrated to increasingly sophisticated digital banking services. “Certainly for the last six or seven years, the amount of new lifetime value — new deposits, new customers — that the branches bring in has been declining,” Kevin Travis, a senior partner at New York-based financial institution consulting firm Novantas, said in an interview.
Branch transaction volume has declined 7% on average each year for the last seven years, according to Novantas research. That trend is expected to accelerate in the coming quarters, as older bank customers who had been the backbone of in-store, over-the-counter transactions discover digital banking services by necessity in the social distancing age. Travis said the pandemic has created market conditions for a “really aggressive” paring of bank branches, and the number in operation post-pandemic could fall by as much as 50% — an eventuality he called “radical” but “fair.”
“It’s one of those situations where every year you look at it and you go, ‘There will come a day when we will need to do something really bold and drastic, but it’s not this year. We can wait another year.’ That’s been going on for five or six years,” he said. “And in our math, now we’re there.”