The Myth of the Disappearing Bank Branch

By Tyler Mondres
ABA Viewpoint

A recent report from the Federal Reserve Bank of Cleveland found that consolidation in the banking industry has not come at the expense of access for customers, as measured by proximity to full-service bank branches. Over the past 20 years, branch proximity has remained stable for urban customers and has moderately improved for rural customers.

In rural parts of the country, the average distance to a bank branch decreased from 4.6 miles in 2000 to 4.3 miles in 2020, according to the study. In urban areas, the average distance to a branch remained 1.0 mile for low- and moderate-income communities, fell from 1.8 to 1.5 miles for middle-income communities, and increased marginally from 1.6 to 1.7 miles for upper-income areas. These findings align with ABA research, which showed that most U.S. households live within commuting distance of a bank—in fact, the average American lives near 25 bank branch locations.

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Mergers and acquisitions contributed to a nearly 50 percent decline in the number of banks between 2000 and 2020. However, buyers largely maintained the branch footprints of acquired institutions while focusing closures on “overlapping or redundant branches,” the study found. As a result, the average number of branches per bank has increased steadily over the last two decades, providing consumers access to larger branch networks. Similarly, the ABA Bank Access Report found that branch closures have largely been concentrated in saturated, upper- and middle-income (primarily urban) markets where branch access is widespread.

Additionally, while physical proximity to a branch is important, technological innovation is rapidly transforming the way Americans bank. For example, mobile and online banking were the two most popular methods for accessing an account in 2021, according to ABA/Morning Consult survey data. Customers appreciate the investments banks have made in digital access. In fact, given the growth of digital and online tools, 95 percent of Americans believe access to banking services today is “good,” “very good,” or “excellent.”

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While the findings of the Cleveland Fed report are encouraging, approximately 5.4 percent of U.S. households, representing 7.1 million families, were “unbanked” in 2019, according to the FDIC, meaning they had neither checking nor savings accounts. America’s banks believe everyone should have access to the banking system and the safety, convenience, and other benefits that come with deposit accounts. Banks of all sizes are making active strides to reach those outside the traditional banking system through initiatives like the Bank On movement. By offering products like low-cost, safe Bank On-certified accounts and continuing to invest in both digital and physical banking options, the banking industry will continue to promote financial inclusion and expand economic opportunities for all.

ABA Viewpoint is the source for analysis, commentary and perspective from the American Bankers Association on the policy issues shaping banking today and into the future. Click here to view all posts in this series.

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About Author

Tyler Mondres

Tyler Mondres is director of economic research at ABA and a frequent contributor on economic and fintech topics to the ABA Banking Journal.