CFPB report highlights reliance on community banks in rural areas

In a data snapshot published today, the CFPB highlighted some of the unique challenges facing rural Americans, including an increased reliance on physical bank branches, given the limited access to high-speed internet and online banking options in many of these communities. The CFPB noted that rural customers visit bank tellers—often at community banks—“at nearly double the rate of urban and suburban customers,” according to a 2020 FDIC analysis.

“Community banks are three times more likely to locate their offices in a non-metro area, and community banks hold the majority of banking deposits in U.S. rural and micropolitan counties,” the CFPB said. “According to the FDIC, in 2012 there were more than 600 counties—or almost one out of every five U.S. counties—that had no other physical banking offices except those operated by community banks.”

Bank consolidation, however, has contributed to the expansion of so-called “rural banking deserts,” which the Federal Reserve Bank of St. Louis defines as “census tracts in which there are no branches within a 10-mile radius from the tracts’ centers.” The CFPB report pointed out that “lack of broadband access is a major limiting factor” in filling the banking needs of these communities. “Only 75.6% of rural people had access to a smartphone compared to 86.2% in urban areas and 88.4% in suburban areas and only 68 percent of rural households had access to the internet in their home, which was a much lower rate than urban households (79.5%) and suburban households (84.5%),” the bureau noted.

The American Bankers Association’s 2021 Bank Access Report noted that most “banking deserts” are located in actual deserts, with the median bank desert containing just 7.6 people per square mile. “For perspective, about a quarter of banking deserts lie in census tracts that are geographically larger than the state of Rhode Island yet contain a median of just 3,000 people,” the ABA report said. In the average rural low-income Census tract, a consumer is within a 10-mile commuting distance of nine bank branches, compared with four for moderate-income rural tracts, six for middle-income tracts and 10 for upper-income tracts.