The Great Migration Away From Branch Banking

According to a survey released by in March 2014, the era of the traditional brick and mortar branches may be coming to an end or at least a significant shift.  The survey asked a little over 1,000 adults within the continental United States “when was the last time you visited a bank branch or credit union branch to conduct personal financial business?”   ATM usage was excluded.

The results were surprising with 34% of the respondents stating that they had not been to a branch within the past 6 months or more, including 4% of the population declaring that they never use a bank.   Also, it was apparent that income does matter – the lower the respondent’s income, the fewer trips to the bank.  For individuals who made less than $30,000 annually, 29% said that they had not visited a branch in over a year.

So what does this mean for CRA?

For starters, pull up the CRA examination procedures and do a quick search for how many times the word “branch” is mentioned.   Actually, I’ll save you a few minutes and let you know that the word branch appears in some form a total of 25 times.  That doesn’t seem that often until you realize that the procedures are only 16 pages long.   During each CRA exam, branch composition and location is factored into your assessment area lending analysis, retail services test, community development review and overall CRA rating.

Next, part of meeting your CRA lending needs is providing services to the low- and moderate-income neighborhoods and individuals in your markets.   That’s a difficult hurdle to clear when your lower income clients aren’t even coming into your branch to hear about the products and services you offer.

That’s why partnering with organizations who service the low- to moderate-income neighborhoods in your community are so important.  If you can’t get these individuals into your branch, you have to bring your branch to them.   Be sure that you are connected to nonprofits and other service organizations to spread word about your products, services and outreach efforts.

You may also need to look at the composition of your products and services.  Are you offering products that are attractive to the younger customers such as full service mobile banking applications, mobile deposit and expansive ATM networks with low or no fees.   Explore opportunities to attract customers wary of traditional bank accounts by expanding into prepaid cards, small dollar loan programs and other innovative services.

Let’s face it, there’s something comforting in the security of a bank branch on every corner.  But in the search for an Outstanding rating, the future of CRA needs to venture around the corner and down the street.

Opinions expressed in this article are that are of the author only and should not be construed as regulatory guidance.