Five Reasons Why Local and Branch Banks May Become a Thing of the Past

Local banks used to be one of the anchors of communities.  Customers dropped in at their local branch to take care of all their banking needs.  For many people it was a pleasant visit – bank employees were friendly and helpful to their customers.  Some customers knew their bankers on a first name basis and had confidence in the integrity of their bank. Most were happy with the service they received.

However, in the last 25 years or so, local banks and branches of large banks have changed dramatically in how they function and in their customer service.  What is happening?  Just as technology has changed the way we do many things, likewise it has changed the way we bank. In addition, the economic downturn has put great pressure on banking institutions, and an increase in fees charged has led to customer dissatisfaction. There is a general distrust of banks.  No doubt, the day will come when the majority of local branches and banks will become obsolete.

What are the primary reasons why this is happening?

1 Technological changes

Such technological innovations as the cash machine, the sophisticated land phone, the mobile phone, and computers are taking over the banking functions that have normally been done by tellers. To make a deposit and get cash, you don’t need to do it during banking hours.  ATMs are open 24 hours a day – the service is fast and convenient.  If a customer needs help with troubleshooting, they don’t need to make a personal visit to the bank.  They simply give the customer service number a call, or send an email. Opening an account or looking at statements or communicate with a bank representative can all be done on the internet.

2 Customer reaction to unfair and excessive increases in fees

A common policy of banks to charge customers excessive fees is driving customers away. A survey by the Credit Union National Association reported that since September 29, 2011, more than 650,000 customers nationwide fled their branch banks to join a credit union, where large fees aren’t so likely to be charged. A good case that occurred just late last year was Bank of America and it’s $5 debit card fee. Customers were so outraged that Bank of America was forced to cancel the fee.

3 The effect of the 2008 financial crisis

As a result of the financial crisis, banks were put under regulations that put limits on certain fees charged to customers.  Banks had to find other ways to generate funds.  Some banks tried to levy charges on debit card transactions and on accounts with less than $6,000 balance.  This was an excess burden on the finances of many customers, and they protested loudly.

4 The impact of brokerage houses offering more financial services

There is a growing trend toward brokerage firms offering more financial services that are in direct competition with banks.  Some brokerage firms are offering bill payment,  check  writing, management of cash assets, funds transfers and others.  This appeals to some because they would like their investments and other financial dealings under one roof.

5 Fewer people are entering banks

One of the biggest impacts on our banking traditions has been the development of the internet.  It’s no longer necessary to visit the brick and mortar banks for most regular banking services.  Many people have not seen the inside of their bank in a long time – they just log onto their computer to carry out banking services. Consequently, some bank branches are already closing.

Even though branch banks are taking a slide, there are a few services that are better   performed at banks.  If you are seeking a personal loan, a mortgage, or car loan, a banking institution is probably the best place to go.

Local and branch banks have changed significantly in recent years.  Technology, an increase in bank fees, and changes in banking regulations seem to be leading to a need for fewer local and branch banks.