It is time for corporates to get serious about eliminating branch activity.
Banks have consistently been closing branches each year since a peak number of locations was reached in 2007, but the COVID-19 pandemic may have pushed banks beyond the point of no return. Branch closures accelerated in 2020 as a response to the pandemic. But, more importantly, consumer behavior also accelerated towards digital banking alternatives.
According to S&P Global’s 2021 Consumer Mobile Banking Survey, 51.6% of people visited branches less frequently after COVID and only 21.8% expect to visit branches more frequently in the future. Meanwhile, 100% of respondents indicated that they had logged on to their bank’s mobile app in the last 30 days. This trend only exacerbates the existing decline in consumer visits to branches. The 2019 FDIC Survey on Household Use of Banking and Financial Services found only 28.4% of respondents visited a branch more than 10 times in a year versus 35.4% of respondents in 2017.
The pricing of branch services is going up
Given the current situation on the consumer side, banks are incentivized to close as many branches as possible. But what about corporates who continue to utilize branch services? Well, if you want your bank to keep their branch open, then you are going to have to pay for it.
A shift in the bank fee market has begun where banks are significantly raising prices for all branch related services. Because, from the banks’ perspective, they can be more profitable by closing branches and eliminating costs entirely than by keeping the branches open for a few corporate needs. With less consumer activity at branches, this means the costs will be passed on to corporate clients. The market has moved and banks are no longer giving a friendly suggestion of utilizing alternatives to branches. They are actively pushing corporates away from branches through price increases.
An alternative banking strategy for corporates
In light of the current market for bank branch activity, corporates should consider alternatives to branch services offered by banks. In addition to exclusively utilizing vault services in place of branch services, potential alternatives include bank by mail, ATM deposits, cash recyclers and smart safes. To learn more about these solutions, check out our in-depth review of deposit strategies in a changing banking landscape.
If your business is still utilizing branch services, then now is a good time to get ahead of the trend in increasing branch closures and branch pricing. A thorough review of your current branch services and potential branch alternatives will help you avoid increased pricing and operational difficulties down the road.