Washington, DC (Washington Insider Magazine)—US banks unexpectedly defied a ten-year trend in 2023 by greatly increasing their physical presence—a trend that will only pick up steam in 2024. In contrast to the past, when the financial crisis of 2008 resulted in several closures and a dependence on online banking services, there has been a rebound of physical facilities.
According to recent data from the Federal Deposit Insurance Corporation (FDIC), US banks added a net total of 94 new branches across the country in 2023, the first time since 2012 that openings have exceeded closures. This growth signifies a break from the consolidation phase that followed the financial crisis, during which banks sought to streamline operations and embrace digital platforms to engage customers.
Challenging the Dominance of Online Banking
While the resurgence in physical branches indicates a shift in strategy for US banks, there remains a considerable gap to fill compared to pre-crisis levels. Despite the increase in branches, the total number still stands below 2012 figures, indicating current efforts to recover lost ground.
In line with a broader industry trend towards re-establishing physical footholds, several leading US banks, including PNC Financial Services Group, Fifth Third Bancorp, and JPMorgan Chase, have announced plans to reopen more branches in 2024. These moves are seen as strategic responses to changing consumer preferences and regulatory constraints on mergers and acquisitions.
Driving Factors Behind the Change
According to experts, banks are shifting their focus towards attracting new customers in the wealth management and small business sectors. They intend to use their physical branches to offer personalized services to cultivate relationships and provide customized financial solutions. With wealth management becoming a lucrative avenue for revenue diversification, banks see branches as essential for achieving their goals.
According to Bancaynegocios, Eric Rosengren, former president of the Federal Reserve Bank of Boston, points out that the largest banks are constrained to pursue domestic acquisitions and to expand into new markets through branch openings. JPMorgan Chase, in particular, has been at the forefront of this trend, announcing plans to open hundreds of new branches in the upcoming years.
Historical Context and Recent Developments
The resurgence of physical branches marks a notable departure from the trajectory set in motion after the 2008 financial crisis. Following the crisis, banks prioritized digital innovation and branch closures to streamline operations and adapt to evolving consumer behaviors.
Branch closures, however, increased even further as a result of the pandemic-induced shift to remote banking, peaking in 2021 with almost 2,400 closures. Notwithstanding these obstacles, the current surge in branch openings in 2023 highlights a more comprehensive reassessment within the banking industry, propelled by an appreciation for the lasting significance of physical presence in fulfilling consumer requirements.
As US banks navigate a rapidly evolving financial landscape, the resurgence of physical branches signals a strategic pivot towards a more balanced approach to customer engagement. While digital channels remain integral, the renewed emphasis on physical presence underscores the enduring importance of personalized service and community engagement in banking operations. This change not only reflects shifting customer preferences, but it also demonstrates how flexible and resilient banks are in the face of shifting market conditions.
