U.S. banks may speed up plans to close branches nationwide, as a new report from financial-services research firm Novantas shows branch-based sales and transactions have slowed significantly in the past 10 weeks amid the pandemic and digital-based banks are seeing a surge in usership.
The company’s report, which was released Saturday, shows that teller transactions dropped around 32% in March and April, compared to the same period last year. This April, there were 28.1 million transactions, down from 49.3 million last April. Branch traffic also fell more than 30% in April and in the first weeks of May, compared to the same period last year, Novantas told Fastinform.
New data on bank traffic shows that while there was an increase in movement compared to a month ago when customers more closely followed “stay at home” orders, numbers still remain down in the last couple of weeks.
U.S. Bancorp’s Chief Executive Officer Andrew Cecere said he expected to close more than 10% to 15% branches and saw around 35% increase in digital activity, in an investor forum last month. At the time, the bank had 3,000 branches.
“The way customers are interacting with banks is changing, and I think this pandemic has accelerated that behavioral change in a fairly substantial way,” he said at the time.
And he is not alone in thinking that these changes are likely to outlast the current conditions. Around 40% of people are expecting to visit their local branch less often after lockdown restrictions are lifted in their community, consulting firm Simon-Kucher & Partners told Fastinform. This changing consumer behavior may point to a larger question of how important bank branches will be in the future.
The report from Novantas notes, “Consumers are being trained to avoid branch lobbies at the moment, adapting to the current environment by using the drive-through, appointments or digital tools. As banks teach consumers that they really don’t need to go into the branch to interact, it also makes them more comfortable using a direct or neo-bank.”
The number of digital banks has been on a rise as consumers shift away from relying on brick and mortar banks, and U.S. digital banks are beginning to see a growth in their userbase. Varo is one of the American mobile-only neobanks that has seen a recent surge in usership. It has nearly two million banking and savings accounts and account growth is up over 60% since the start of the year, the company told Fastinform. Spend is also up roughly 1.5 times over the same period, and deposits are up roughly 3.5 times over the same period, according to the company.