---
title: Here’s what account holders had to say about their local branches in 2019
description: Community financial institutions are a critical part of our local and national economies. According to the FDIC and ABA Banking Journal, community banks hold 42 percent of small business loans while only accounting for 13 percent of banking assets. Community banks are relationship lenders. They live in the communities they serve and are able to...
---

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Community financial institutions are a critical part of our local and national economies. According to the FDIC and ABA Banking Journal, community banks hold 42 percent of small business loans while only accounting for 13 percent of banking assets. Community banks are relationship lenders. They live in the communities they serve and are able to make loan decisions using “nonstandard data” like personal knowledge of the borrower. Bankers use this understanding of the borrower and the community to become financial advisers, helping small businesses thrive.

But financial institutions today—especially community banks and smaller credit unions—face a number of threats both old and new. Big banks have gotten bigger. Digital-only challenger banks offer a streamlined customer experience at the expense of brick-and-mortar branches. Lending platforms, savings tools and other fintechs are unbundling financial services piece by piece. And now, Amazon, Facebook and other Silicon Valley giants are exploring the viability and potential consumer interest in deposit strategies driven by tech companies rather than banks.

## Big, bloated banks

Over the last several years, big banks have expanded their market share. The top four U.S. banks hold an astounding 36 percent of the financial services market. Large-to-giant financial institutions—those with more than $10 billion dollars in assets under management, according to the FDIC—held 59 percent of market share in 2018, up from 50 percent in 1994.

## Lean, mean fintech machines

The proliferation of digital tools, platforms and experiences that arose from the ashes of the financial services crash in 2008 created a new tech ecosystem that aligned perfectly with evolving expectations about an FIs relationship with its customers. In the years since the financial crisis, fintechs like Qapital, Acorns, Venmo and Square poached individual services—savings, micro-investing and payments, respectively—across a traditional FI’s solution set.

Challenger banks like Chime, meanwhile, offer the same services as traditional FIs with a more convenient, mobile-friendly user interface but without the brick-and-mortar branch.

## The conflicted role of the brick-and-mortar branch

Depending on who you ask, the brick-and-mortar branch is either dead, evolving or thriving. Financial experts began questioning the future of branch banking when challenger banks rose to prominence in the early 2010s, and for good reason: U.S. bank branch closures reached a new high in 2018. According to research from Market Force Information, 64 percent of customers visit a bank branch to conduct a teller transaction at least once a month, including traditionally digital-first millennials. The conversation around the future of banking needs to shift from the branch versus digital debate and focus on what the consumer wants: convenience with a human touch. Roughly 75 percent of Americans live paycheck to paycheck. Discrepancies in their finances mean disaster, and when disaster strikes, no one wants to deal with a chatbot.

Data from The Financial Brand—one of the most influential and respected financial services publications in the country—tells an equally confusing story. Since 2009, approximately 11.4 percent of bank branches, big and small, have closed their doors. In 2019, however, “nearly half (48 percent) of all banks and credit unions had plans to add branches versus only about a third that had similar plans 12 months earlier.”.

While the financial crisis certainly played a role in downsizing, it’s fair to assume that challenger or digital-only banks also played (and continue to play) a significant role in legacy branch closures. Yet high-quality, personal customer service in the brick-and-mortar branch remains a significant value proposition for financial institutions, but there’s one core difference between this coming decade and those previous, when the branch was the primary touchpoint with the vast majority of customers. In-branch, personalized customer service can no longer be the only value proposition—it has to be supplemented with customer-friendly digital tools that make it easy to open accounts, manage deposits, apply for and secure loans, and ultimately create an experience for customers that can replace in-branch interactions without replacing the actual branch.

The function of the branch also has to adapt. In the years before online banking, the branch was the only real significant revenue driver for FIs. Today, they are fulfilling a supporting role, both for customers and for the overall business model. According to The Financial Brand, the main reason customers visited a branch was to resolve a problem with an account. Revenue-generating services like account opening and lending have largely migrated to the digital channel, further emphasizing the need for a balance between investments in physical locations and digital platforms.

With the amount of seemingly conflicting data and statistics about the growth, decline and evolving role of the brick-and-mortar branch, we thought we would leverage our partnership with Relative Insight—an AI-driven language analysis and comparison platform—to gauge how customers perceive and interact with legacy branches. In a language comparison between banking forums online and a sample of bank websites, we found that customers were nearly 11 times more likely to talk about customer service and nearly 12 times more likely to discuss branch banking.

Here’s a sample of customer comments we pulled using Relative Insight’s platform:

–      “As a new banking customer, it is good to build a relationship with a banker at a local branch. They want to help if you have questions or problems, and they will want to give you the benefit of the doubt if they know you as a respectful customer who’s trying to establish yourself financially.”

–      “You might (want) to reach out to the branch manager at your local branch and ask, go see them in person and ask how their claims work.”

–      “Do you have a local branch? Talking to a rep in person can usually resolve things a lot faster than phone or email tag.”

–      “Now that’s an experience! That’s what will keep me at a local branch rather than pulling the trigger on an online-only account. I’ve heard good things about credit unions as well. I just want to get the most benefits possible while avoiding ridiculous fees. Congrats on making the move to such an amazing bank. If I decide to leave Chase, I hope to end up in a situation half as good as yours.”

–      “I haven’t stepped into my local branch in about 5 years but the times I have been in there they definitely made me feel welcomed.”

Even without a ton of context, it’s clear that customers’ sentiments toward their local branches align well with the broader market trends. That is to say, more than a decade into the most significant change to the financial services industry since the Goldsmiths in London began issuing banknotes in the 19th century, no one truly knows what will happen to the brick-and-mortar branch.

Nevertheless, we can safely assume that branches aren’t atrophying, but they will be forced to evolve. There is no one-size-fits-all approach to updating bank branches. For some customers in rural communities, switching to digital banking with the option to video call branches is the perfect way to bridge the growing distance between communities and bank branches. Other rural residents who lack reliable access to broadband internet and cell phone service need branches to continue serving a traditional role. In urban communities, big banks found success in transforming their branches into cafés. Video teller ATMs handle simple transactions and financial coaches give advice in a casual environment.

When transforming their branches, banks must also consider their current employees. Community financial institutions employ nearly 1 million people in the United States. To retain these critical positions, FIs must consider why customers are visiting bank branches, and if current employees are equipped to handle their needs. If tellers are becoming extraneous, can they be retrained as online customer service representatives? According to The Financial Brand, 50 percent of customers who visited a bank branch in 2018 did so to resolve an issue with an account. For this reason, retaining and retraining current employees with good interpersonal skills is critical for success.

To challenge the challengers and prevent further branch closures, traditional FIs must commit to listening and learning about their customers’ wants and needs and actively adapt their digital and in-person services.

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