As the coronavirus pandemic upends the traditional way many industries have have operated over the years, some banking and fintech leaders say a lasting impact on the banking sector could be the disappearance of branches.
“I think everything that’s happened over the last 60 days or so is probably accelerating a trend that’s already happening, which is the reliance on traditional bank branches will continue to go away,” Chime CEO Chris Britt said during a webinar hosted by FT Partners.
Britt said the digital bank’s more than 8 million customers don’t want to go into a bank branch and are comfortable with a mobile-first relationship.
Bank branches in the U.S. have been on the decline in recent years, while digital banks such as Chime —untethered to brick-and-mortar constraints — have emerged.
The number of full-service bank branches across the country declined 12% between 2010 and 2019 — from 95,000 to 83,000, according to a Quartz analysis of Federal Deposit Insurance Corp. data.
As the coronavirus outbreak spurred calls for social distancing, many banks began closing branches in mid-March to protect customers and employees.
Many customers have been forced to turn to digital options for their banking needs because they can’t simply walk into a branch.
But the majority of those customers are not missing their trips to the bank, Alex Rampell, general partner at Andreessen Horowitz, told Business Insider.
“Almost nobody is suffering from inability to enter a physical branch,” said Rampell, who focuses on financial services investments at the venture capital firm. He added that the coronavirus pandemic represents an “A/B test of branch versus branchless banking.”
“It may be more fun to see a movie at a movie theater, but there’s nothing necessary or better about doing business at a bank,” he said.
Some say the economic impact of the pandemic may force banks to take stock of the physical branch model like never before.
“I can see big branch networks being reduced to help with costs,” Steven Page, vice president of IT, marketing and digital banking for SafeAmerica Credit Union, told the Financial Brand.
Drops in revenue could force community banks and credit unions to make decisions they have been avoiding relative to brick and mortar, Market Insights CEO Joe Sullivan said.
“Declining profits will make some bankers finally take notice and take action this time,” he told the Financial Brand. Changes could involve eliminating or repurposing branches to something beyond the teller-deposit function, he said.
As the majority of the country completes a second month under stay-at-home orders, Americans are forming habits that could continue once the pandemic is over.
“A lot more people are getting used to transacting remotely,” Renaud LaPlanche, co-founder and CEO of Upgrade, told Banking Dive.