The P.A.

A weekly address from Patrick Adams,
President of St. Louis Community Credit Union

Brick and Mortar Are Here to Stay

On May 27th, 2014, posted in: Uncategorized by

Brick & Mortar

Alright already. The rumors have to stop. This idea that bank and credit union branches are a thing of the past and that everyone will be using a phone to do their business in the future is just a wee bit exaggerated. That said, pundits and prognosticators alike have been telling you and me, for years now, that branches are dead. No more “brick and mortar” has been the mantra for those who profess to be in the know. Please, they need to settle down.

Wasn’t it Mark Twain who corrected all of the human chatter of his time by pronouncing that “the reports of my death have been greatly exaggerated?” Same holds true here – branches are not dead. So everybody take a chill pill – PLEASE! They will continue to exist. They may look different and act different and they might not even be as busy, but trust me on this one – they will always be around. “Always” means for a really, really, really long time.

So, I set out to prove what I’ve believed for years – branches aren’t dying off. Interestingly, the discussion of branch disappearance was heightened during the financial crisis of the recent past (2010-2012). That in and of itself should slow your acceptance of “the branch is dead” drivel. Of course, in the throes of a financial crisis, many banks shuttered their existence. This led to the accompanying large (and small) scale mergers that led to the absorption and closing of branch offices by larger banks that did not want overlaps.

Total openings far and away exceeded total closings in 2005, ‘06, ‘07, ‘08 and ‘09. Jump over to 2010-2012 for which we’ve just addressed – and rejoin the count in 2013 – and yes, branches increased by more than 250 units during last year. See, I told you so.

Yes, mergers and institution failures have yielded an erosion in the count. And those mergers and acquisitions are cheaper than they used to be because of bank’s market value being diluted by tough economic times. Sure, if it costs less to acquire a bank, it is easier to close down some of the branches.

Truthfully, banks have gone away at a much faster pace than branches. Yes, the average scope of branch networks, in terms of number of branches per institution, is increasing. Thus, there are no reductions in the scope of banks’ branch networks in terms of the number of submarkets in which they offer branches to consumers.

Yes, branches are expensive. And, yes they may see less consumer traffic than in the past. However, the branch continues to be the overwhelming favorite for account openings. New accounts, deposit gathering, as well as an essential means of reinforcing the institution’s convenience, availability, trust and community commitment are all part of the equation – thus, the reason why branches are needed.

I’ll give you this – branches are not the most profitable of the delivery channels. That’s a fact. But, they are not going away. Those of us who really pay attention to branches realize that the value of a continued physical presence is essential to our success. As a result, I would suggest to you that the judicious expansion of branches will continue as long as economic circumstances allow.

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