Get Used to Virtual Banking

Branch closures set a new record. Expect more mobile and ATM services.

As foot traffic dwindles, bank branches are closing in record numbers, including those of large institutions and smaller banks. Net closures totaled nearly 1,500 branches last year, according to a recent report by SNL Financial, a financial data firm -- the most since it started monitoring closures in 2002. This is just the beginning of the slide. Celent, a consulting firm, forecasts declines of up to 40% over the next decade.

Highly populated metro areas had the most closures last year, with Philadelphia, Chicago and New York dropping the largest number of branches. The biggest cuts are expected to come from large banks, such as PNC, which reduced the number of its branches by 6% in 2013, and SunTrust, which cut 8% of its branches.

But consolidation among community banks is expected to continue, and that will add to branch closures, too. (For investing opportunities in small banks, see Small Banks, Big Dividends.)

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All banks will be walking a tightrope, says Bob Meara, senior analyst at Celent. “They can’t disappear in any market, but they have to reduce density and increase digital transactions,” he says. Look for big banks to follow Bank of America’s lead and introduce ATMs that do more, whether it’s offering virtual tellers via Web cameras or pro­viding exact change. Some banks, such as Wells Fargo and Bank of America, have added online appointment scheduling for branches, and other banks will follow suit.

Smaller banks will focus on stepping up mobile options. Currently, 20% offer deposits via smart phone, and Cary Whaley, of Independent Community Bankers of America, estimates that 60% offer mobile banking, mostly via apps.

Jessica L. Anderson
Associate Editor, Kiplinger's Personal Finance
Anderson has been with Kiplinger since January 2004, when she joined the staff as a reporter. Since then, she's covered the gamut of personal finance issues—from mortgages and credit to spending wisely—and she heads up Kiplinger's annual automotive rankings. She holds a BA in journalism and mass communication from the University of North Carolina at Chapel Hill. She was the 2012 president of the Washington Automotive Press Association and serves on its board of directors. In 2014, she was selected for the North American Car and Truck Of the Year jury. The awards, presented at the Detroit Auto Show, have come to be regarded as the most prestigious of their kind in the U.S. because they involve no commercial tie-ins. The jury is composed of nationally recognized journalists from across the U.S. and Canada, who are selected on the basis of audience reach, experience, expertise, product knowledge, and reputation in the automotive community.