Why Banks Still Grow Branches

By Raw Fisher From Marc Fisher's Blog
Tuesday, September 18, 2007

Other than the time a house painter asked me to pay him in a giant load of cash that he could dispense to his workers, I don't think I've used the services of a bank teller in at least 14 years. So when the local listserv filled with angry and exasperated comments about how the site of a demolished movie theater would soon be home to yet another bank branch, I joined my neighbors in puzzlement.

In this era of online bill payment, direct deposit of paychecks and ATMs at every turn, what is the lingering attraction of a physical bank branch?

Throughout the nation, residents, community planners and retailers wonder why there seems to be no limit to the desire and ability of banks to snap up retail spaces that formerly housed all manner of shops.

An American Bankers Association survey this summer found that only 36 percent of U.S. consumers use branches as their primary banking method. But that's still the largest group clustered around one method. Online banking came in second at 23 percent, followed by ATMs at 21 percent, mail at 8 percent and telephone banking at 5 percent.

The survey found that those who cling to bricks-and-mortar bank offices are generally older folks; this is one of those generational splits that pop up a lot in studies of how we live these days. Still, fully a quarter of those under age 34 side with the older crowd and prefer to do their banking in person.

Why? Money's a funny thing, and apparently lots of folks still just don't trust the machines and the Interweb when it comes to their hard-earned dollars. A majority of Americans are just fine with viewing statements and paying bills online, but when it comes to depositing checks -- well, for that, we seem to put more trust in the old idea of handing paper to another human being. For me, the opposite holds true. When it comes to money, I far prefer the mechanical incorruptibility of the machine to the fallibility of my fellow man. I don't understand the attraction of waiting in line for the chance to attempt communication through a thick plate of bulletproof glass. If I crave that experience, I'll go get some lousy food at a bad carryout.

A huge majority of Americans still visit a bank branch at least once a month. What do they do there? Loans. Okay, that makes sense. But that's hardly a daily activity. For normal exchanges of paychecks and bill payments, what allure is there to visiting the teller?

Security and comfort play a large role here; the same reasoning helps explain the continuing widespread use of checks when electronic bill payments are more efficient and accurate. Somehow many, if not most, of us believe there's something unreliable or fishy about taking care of our personal finances on a keyboard.

Still, this is an odd phenomenon: According to banking industry reports, the expansion of banks into every retail nook and cranny isn't even profitable for banks. And retailers in other businesses tend to resent banks' expansion into ever more branches because banks pay high rents and drive up rental rates for everyone else.

I asked readers on the blog for their theories explaining the proliferation of bank branches, and they said they go into branches to avoid paying ATM fees, to take advantage of the free coffee at the bank, to buy money orders or use the change machine, to use a safe deposit box, to make large deposits for which they don't trust the ATM and to sidestep their concerns about the security of transactions via the Internet.

Others, including some who said they work in banks, had a different perspective: Branches exist mainly because some cranky old people don't know how to use new technologies.

Glad we all agree. See you at the ATM.

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