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Banks Turning from Bricks to Bytes

Convenient banking used to mean having a branch near your home or work that was open during times you could get there. Now it means not having to go to a branch at all.

Mobile banking lets people participate in the financial system without having to visit a physical branch. All it requires is a mobile phone. That’s why it’s helping to “bank the unbanked,” or bring financial services and accounts to people who haven’t had them before.

So, we probably should have seen this coming: with the rise of mobile financial services, banks are closing branches by the hundreds.

As more consumers use internet and mobile banking, fewer of them visit brick-and-mortar branches. It’s more convenient and saves time. In response, banks are rushing to offer remote check deposit, funds transfer, bill pay, and other services through their web and mobile apps. It’s more cost effective.

The shift has become significant enough that banks of all sizes are de-vesting in branches and re-allocating those funds to mobile.

Bank of America recently announced it plans to cut 150 branches this year—at the same time as its investing $3 billion in mobile and other banking technology. It’s not alone. This Wall Street Journal article lists a few more banks doing the same thing in the US. Late last year, Barclay’s made a similar announcement, that it would cut 1700 customer-facing jobs from UK branches in 2014.

How much consumers want to visit their bank in person largely depends on their age—or their comfort with technology. A survey of more than 2300 adults in the UK revealed that 75% of Generation Y consumers prefer online or mobile banking to in-person, while only 11% would rather go to a branch. For the over-55 set, a third would still choose an old-fashioned face-to-face experience. And predictably, the “professional class of LinkedIn users,” regardless of age, also prefers virtual banking.

I don’t think bank branches will ever go away entirely, but I certainly do think we’ll continue to see fewer new ones built and more existing ones close in the years to come, as mobile banking becomes the new standard.

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