The end of bank branches?

For the longest time, people have suggested that brick-and-mortar bank branches were becoming obsolete--even as banks opened more bank branches. The term click-and-mortar seemed to be an apt description of the state of the industry. 

But in the wake of the news that Bank of America envisions a day when it might cut its branch footprint by about 10 percent, you have to wonder if online banking and--looming on the horizon--mobile banking will lead us into a new era of less reliance on walk-in structures. 

To be sure, there are no immediate plans to close Bank of America branches en masse. But over time, the bank may well cut back 10 percent as more customers opt for other interface options. So while the plans are not immediate, it does suggest that the bank's  two-decades long branch expansion is cresting. Indeed, since the end of 2008, the bank has closed down 30 bank branches and 259 ATMs. 

In a sense this is good timing. Bank of America is under enormous pressure to keep costs low. Closing branches would certainly help. Red Gillen, senior analyst with Celent, says: "The fact is that an increasing number of consumers (especially younger ones) and businesses rarely go to branches anyway. By maintaining and growing its mobile and online offerings, Bank of America should be able retain such consumers as customers." 

He expects the banks to place more emphasis on enhancing its mobile and online technology. Remote deposit capture, person-to-person payments, mobile-based promotions and other services "are now probably a lot closer to the center of BofA's radar screen." They are on other banks' radars as well--small and large. Indeed, Citigroup today launched a mobile offering optimized for smartphones, including the BlackBerry, Palm devices and iPhones. Wells Fargo launched "just in time" online expedited payments. 

This is a phenomenon that all banks must grapple with. The TowerGroup predicts that the number of online bank customers will grow at a 20 percent compound growth rate through 2012 and that online transactions will make up 40 percent of all bank transactions by 2012. 

There is the possibility of some sort of disintermediation. Giving up face-to-face human contact can impose some costs. The time to think about how your bank can maintain touchpoints in this new world is critical. You cannot give up this critical selling opportunity easily. But maintaining contact via the Internet and mobile airwaves will not be easy. This could shake up the industry over time. There will be winners and losers. - Jim