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Celent: FI Branches To Decline 30%-40% In Decade
BOSTON (5/24/13)--The number of branches built by credit unions and banks are expected to decrease between 30% and 40% in the next decade, according to Celent, a Boston-based financial services research and consulting firm.

Branch growth the past 40 years has exceeded population growth, said Celent's report, "Branch Boom Gone Bust: Predicting a Steep Decline in U.S. Branch Activity. "The U.S. retail banking branch network has yet to respond to the obvious migration of customers to new digital alternatives," said the report's abstract.

In 1970, there were 107 branches for every million individuals. By 2011, that had grown to 270 branches per million.

"There is every reason to suggest branch densities would be substantially lower now than 30 years ago, but just the opposite has occurred," said Bob Meara, senior analyst with Celent's Banking Group and co-author of the report. "Given this trend, a slow, but inexorable reduction in U.S. branch density seems unavoidable."

"Beyond simply reducing the number of operating branches, what is needed is a fundamental redesign of retail operating models. Rather than resisting the trend, banks should welcome it and reinvest the savings," Meara added.

Jim Holt, president of Wichita, Kan.-based, $197 million asset Mid American CU, said branches will remain an important part of how the credit union delivers its services and are expected by members.  In the past 20 years, the credit union has learned that members want every conceivable option to access the credit union they can get, including Internet and mobile banking, ATMs and branches, he told the Wichita Eagle (May 23).

Branches likely will change by becoming physically smaller but still must meet consumers' expectations and needs, he told the newspaper.

Mid American CU opened a full-service branch earlier this year and the board likely will be discussing the credit union's branch strategy, he told the publication.  It has two full-service branches in Wichita, a branch it jointly owns and operates with Cessna Employees CU in south Wichita, and a branch it acquired in Arkansas City.

Still, Celent indicates that  financial institutions must adapt to consumers' increasing use of online and mobile banking services.

"If banks don't align their multichannel strategies with this seismic shift in consumer preference, they'll be at a significant competitive disadvantage," said Stephen Greer, analyst with Celent's Banking Group and co-author of the report. "Financial institutions have their work cut out for them because transforming the branch network is neither cheap nor easy."
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