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What Bank Branch Closures Mean for Consumers

John Gower

The traditional notion of banking, in which customers visit their local branch to deposit money, check their balance or take out a loan, may no longer be the reality. In the past year, American banks shuttered more than 2,000 branch locations--and news of additional closings appears on a regular basis. Banks cite rising operation costs and shifts in consumer-banking behaviors as primary causes for reducing the number of branches.

For banks, these decisions are a matter of improving their bottom line, but for customers, these closings may force them to develop new habits. In one way or another, most people are likely to notice a change in how they interact with their bank.

Heightened emphasis on self-service options. In order to compensate for fewer branches, banks must offer their customers alternative means of accessing their money. In this light, mobile and online banking is a win-win situation. Consumers want seamless, remote access to their accounts and banks want to save money. Self-service transactions are significantly cheaper to process than the alternative of live teller assistance.

Evidence shows the majority of Americans already (or will soon) have the capability to bank from their phones. A recent FDIC report concluded 86 percent of Americans own a mobile phone--half of which are smartphones, with access to the Internet. Banks are taking note of smartphone ubiquity by pouring more effort and money into their mobile-banking services.

As such, customers are likely to find their financial institution heavily promoting mobile and online banking options. Even those institutions that don't yet offer such services will likely be investing in the technology in the near future; otherwise, they risk becoming obsolete.

Alternative customer service. Despite a trend toward self-service banking, many customers--especially small business owners--still prefer face-to-face interactions when it comes to certain transactions. Banks must reconcile this core customer need with their own corporate strategy of cutting less-profitable branches.

Particularly in smaller towns, where bank branches may be few and far between, some institutions are experimenting with new ways to engage customers on a personal level. Bank of America, for example, recently announced its limited rollout of ATMs with real-time video chat capabilities. The "Teller Assist" feature will be available during extended business hours for customers who need additional assistance while using the machines.

Other initiatives to modernize customer service include in-branch video chat rooms, which allow customers to speak with a bank specialist, even if that person is not located on site. Banks benefit from these types of services as well, thanks to savings on labor costs. These institutions can centralize their specialists rather than have to provide a full team at every location.

Bringing banks forward. For some financial institutions, the decision to reduce the number of branches embodies a quality-over-quantity value. While branches may be fewer in number, many of those that make the cut could see significant remodeling to modernize the customer experience.

Similar to Apple stores, some banks are focusing on reduced emphasis on the teller line, greater use of technology (e.g., tablets) and incorporation of community elements such as lounges, coffee shops or even yoga classes.

John Gower is an analyst at NerdWallet, a website dedicated to providing unbiased financial information and helping consumers find the best savings account, free checking accounts, low-interest credit cards and more.

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