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Banks Trim Branch Networks, but See Branches as Vital in Entering New Markets

Recent data shows that while banks continue to cut overall branch numbers, they are also deploying their network across a broader geographic base. These trends are in large part due to digital channels now dominating for everyday banking transactions. As a result, banks are maintaining a less dense network of branches in existing markets; and they are opening de novo branches in expansion markets.

The following table shows branch numbers for some leading U.S. banks at the end of the first quarter of 2023, as well as net changes from 1Q22 and 1Q18.

Most banks have closed branches steadily in recent years. Wells Fargo closed 180 branches between 1Q22 and 1Q23,and 1,280 branches over the past five years (representing a 22% decline). U.S. Bank, PNC, Huntington Bank, Santander Bank and First Horizon have also cut their branch networks by at least 20% over the past five years.

Banks have indicated that they will continue to downsize their branch networks, but this does not mean that we are witnessing the extinction of the branch channel. Surveys show that consumers continue to value branches: in the J.D. Power 2023 U.S. Retail Banking Satisfaction Study, 38% of customers describe branches as essential. And banks see branches as a key channel for:

  • Branding and marketing
  • Customer acquisition and onboarding
  • Customer service
  • Local community engagement
  • Showcasing new products and technologies
  • Expert advice and support

What’s more, branches are critical beachheads for establishing a presence in new markets.

  • At its 2023 Investor Day, JPMorgan Chase reported that though it closed 22% of the branches in its legacy network between 2017 and 2022, 15% of its current branches were opened during the same period in new locations. It now has branches in each of the 48 continental states and 60% of the U.S. population is within a 10-minute drive of a branch (up from 50% in 2017. JPMorgan Chase is planning to grow its population coverage to 70% in the coming years.
  • Bank of America recently announced plans to expand its retail banking network into seven new markets, even as it cuts its overall branch count. The bank currently has branches in 83 of the top 100 markets and plans to expand that number to 90 by the end of 2025.
  • TD Bank announced plans to open 150 new branches by 2027, as it seeks to grow market share in south Florida, Atlanta and South Carolina.

In summary, trends in digital and branch channel usage create opportunities for traditional bricks-and-mortar banks to reduce overall branch numbers while expanding their reach into new markets through de novo flagship branches.

5 Branch Reinventions that Can Turn Bricks and Mortar into Gold

Iconoclasts are forecasting the end of the retail bank branch. Simple and Moven have gone so far as to delete the word “bank” from their names, and make the rounds at industry events heralding the brave new branch-free landscape.
But US consumers and small businesses are channel omnivores. Give them mobile, online, ATM, phone and branch—all will be used by some, and some will be used by all. The cost of channel choice is great, and retail margins are on a diet, so reinvention is an economic necessity. Channel R&D is accelerating as banks large and small find the unique branch blueprint.
Look at these strategic innovators:

  1. Forget the movies, head to the branch. Small but mighty Umpqua Bank, with 200 “neighborhood stores” in the Pacific Northwest, is starting a “slow banking” revolution. Giant plasma touchscreens are used as “Discover Walls” to showcase neighborhood events, local merchants and podcasts. Wii bowling nights and Food Truck Tuesdays are big draws. Umpqua’s strategies add up to fast growth in key demographics: young, upscale families and small businesses.
  2. No longer solo, the branch is now the fulcrum of an omnichannel world. TD Bank lives their tagline—“America’s Most Convenient Bank”—legacy of the 2008 Commerce acquisition. TD’s 7-day, evening hours branch access has long been a differentiator. Now, omnichannel integration is sophisticated. Local branch manager videos and banner ads are served up in real-time by recognizing customer IP addresses. No surprise TD’s 2013 ad campaign abandons Regis and Kelly for “Bank human, again” featuring their branches as the headline act.
  3. Tellers are out, specialists are in. Chase, with 5600 branches, has got the yin and yang of their branch future figured out. Service costs are being squeezed through self-service kiosks: ATMs on steroids that can handle 90% of all teller transactions. At the same time, Chase is ramping sales horsepower with a six-fold increase in Private Bank branch presence , delivering 5x growth in the number of Private Bank clients since 2010. Other Sales Specialists in branch have grown 20%. And Chase’s net branch count is increasing, with new builds that are smaller and specialist-rich.
  4. Going virtual and mobile: PNC is working towards a vision of less physical density and more multi-channel options, reducing their branch count from today’s 2850 selectively. Going well beyond the now-familiar mobile deposit and digital/social contact center options, PNC is rapidly expanding mobile stores, street teams, community brand ambassadors and segment-specific “thin branches” that match the needs of their micromarket.  Watch for the famous “PNC Conversation” to get even smarter and better.
  5. Cut the ad budget and buy or build branches: Since 2008, M&T has doubled in size to 725+ branches, but its footprint radius has grown a mere 27 miles. Branch density is a strategy M&T uses effectively to build brand awareness and bank profitability, and acknowledges it enables a lower advertising budget. M&T’s invested in activating branches through clever and comprehensive management of their Baltimore Ravens and Buffalo Bills partnerships, ranging from in-branch promotions with players and shared community service programs to management of the franchise like a mega-branch, complete with sales goals. Banking Built for Baltimore demonstrates M&T’s smart leverage of branch penetration and sponsorship potential.

The answer to branch strategy isn’t as simple as develop or dismantle, reinforce or reduce. Like most strategy and marketing wins, it’s about defining a course that magnifies strengths, mitigates disadvantage and sets a course that fits your franchise, and your future.

Where online sale of lip gloss and B2B software customer retention converge

Sometimes marketing inspiration and confirmation of instincts comes from places you wouldn’t normally look. This recent blog post on getelastic.com is case in point: http://www.getelastic.com/the-easiest-way-to-increase-conversion-by-20/. On the face of it, this post would seem to be quite far afield from the world of customer retention in B2B software, or any of the other B2B industries in which EMI works for that matter. And indeed there isn’t much that links lip gloss and software; but there is a link in the approach to solving marketing challenges.

The getelastic blog post starts off with a research-based data point: ecommerce customers are 20% more likely to purchase a product that has at least one customer review. Then, based on that data point, it presents several reasonable ways to obtain that key *first* review. The ways to do this are only important if you’re interested in driving web purchases. What’s important outside that context – and especially in a B2B context like CSM strategy for SaaS – is the way in which marketing research and analytics have identified an operational measure which becomes the strategic focus. Increasing web sales is obviously the business goal, but it’s so broad and influenced by so many factors that it’s unwieldy as an operational focus. By isolating one key factor that has a significant impact on the objective, exploration and testing of tactical options becomes significantly easier. In mathematical terms, you solve for “reviews” because you know that it will drive conversions.

Take this approach out of the world of online sales of lip gloss and into the world of B2B software customer retention and it is still just as effective. Retention is impacted by a multitude of factors –satisfaction, perceived value, switching costs, depth and breadth of utilization – each of which can be affected by a set of strategies and tactics. To optimize retention, you must first sift through all the potential factors to identify those that actually have the greatest impact. Once you have effectively ranked the factors based on their likely impact, then you can develop retention marketing strategies – new communications approaches, new messaging, testing – that specifically and precisely aim to drive improvement in that factor.