Bank branches are falling like tree limbs in a storm and emptying Manhattan’s corner retail spaces.
America’s profit-hungry banks are dismantling more of their brick-and-mortar outposts with lower-cost, increasingly popular tech and mobile services — and the accelerating trend will force more widespread closures and layoffs, analysts say.
US banks shuttered a net 1,487 branches nationwide last year, an-all-time record, according to SNL Financial. Bank of America accounted for 189 of that total.
Until late 2012, Bank of America hadn’t seen the impact of smartphones and tablet computers that allow customers to snap and deposit checks. Today, that accounts for some 10 percent of BofA’s check deposits.
Bank of America CEO Brian Moynihan told analysts earlier this year that branch closures were part of the company’s continuing cost-cutting campaign. He noted how many customers were now, in effect, carrying “a branch in their pocket.”
The trend continues, with 281 net branch closings among banks nationwide in the first quarter of 2014, SNL Financial calculated. More branches were closed than opened in New York State in the first quarter — net closings of 54.
The huge technological expansion in online and mobile banking, which reduces the need for human branch tellers and staff — and for physical branches — will reach a new milestone in just five years.
That’s when more than 1.75 billion mobile phone users, a staggering 32 percent of the global adult population, will have banked with their smartphones, compared with 800 million today, according to a Juniper Research forecast.
Experts says the bottom line for banks is a no-brainer.
“Consumers can buy a ticket online around the world in five minutes but it still takes them 30 minutes to open a bank account. Technology is changing that,” said Jay Sidhu, founder and CEO of Customers Bank, a 500-staff commercial bank headquartered on Park Avenue.
“Today, in my opinion, you don’t need bank branches. You need an innovative culture, and you need a passion to not settle for anything but an extraordinary client experience.”
Sidhu, a native of India, should know. He founded his bank in 2009, soon after his 17-year stint as CEO of Sovereign Bank, prior to its acquisition by Santander Bank.
Customers Bank, with $5.5 billion in customer assets, has 50,000 clients who bank at any one of its 13 physical branches. But that’s overshadowed by the bank’s customers who deposit and transfer funds with high-tech tools.
A huge 1.2 million customers bank remotely via smartphones, accounting for 80 percent of Customers Bank’s consumer banking activity.
The old Sovereign Bank model would have needed up to 90 physical branches to keep pace with the same volume as today’s Customers Bank’s business, according to Sidhu.
“Right now, we’ve no intention of opening new branches,” he said. “We want to introduce more cool technology.”
Sidhu is not alone.
“The idea of electronic banking is the wave of the future,” said bank industry analyst Dick Bove of Rafferty Capital Markets.
That takes on added urgency in today’s low-margin bank lending business.
“The cost of running a bank is very high when interest rates are very low and the yield curve is relatively flat,” Bove added.