Evidence suggests that the time for corporates to eliminate branch activity is now.
In 2007, the number of banks with brick-and-mortar locations peaked. Since the 2008 financial crisis, the number has been in decline. The COVID-19 pandemic has only contributed to the number of closures, likely to the point of no return. Banks have anticipated this change for years, but the acceleration from the coronavirus has changed their language: if you want to keep using branch services, it will cost you.
What decisions are banks making around their branch services, and what choices do corporates have in the wake of this trend? In this blog, we explore everything you need to know about this trend, and what you should do to keep costs low.
For years, banks have been hinting that corporates should begin using alternatives to branch locations. While considered an essential business, many branches were either fully or partially closed during a period marked by social distancing and other contact-reducing measures. More, many found that performing transactions digitally was far more convenient than visiting a bank on-site.
According to S&P Global’s 2021 Consumer Mobile Banking Survey, 51.6% of people visited branches less frequently after COVID and only 21.8% expect to visit branches more frequently in the future. Meanwhile, 100% of respondents indicated that they had logged on to their bank’s mobile app in the last 30 days. This trend only exacerbates the existing decline in consumer visits to branches. The 2019 FDIC Survey on Household Use of Banking and Financial Services found only 28.4% of respondents visited a branch more than 10 times in a year versus 35.4% of respondents in 2017.
Branches are expensive to run, and with the sharp decline in high-volume transactions, the competitive value of having a brick-and-mortar location has essentially been eliminated. Corporates who plan to continue utilizing branch services will now have to pay for their choice – less consumer activity means higher costs. Banks are now significantly raising prices for all branch-related services, as they have found that they can be far more profitable by closing branches and eliminating costs for limited corporate needs.
While some experts insist that digital-only banks are less trustworthy than their counterparts and that they will survive long-term, the evidence remains scant. What role will branches play moving forward?
Digital banking was popularized primarily by younger Americans who opted for the convenience of mobile retail banking services. After COVID-19, nearly every generation has been forced to make the switch to digital, and corporates may not be far behind.
Corporate banking has been a key profit center for most banks, but without the day-to-day traffic of retail banking, branches have either been forced to close or retool their models to focus on specializations. While it is unlikely that all banks will shift to a digital model, locations are fewer and further between, and bank fees are likely to continue escalating.
For corporates who have relied on in-person banking, it is fiscally wise to reconsider the way you do business. Costs can be cut dramatically on banking fees when you rely on a treasury consultant who knows the ins and outs of banking.
There are more than 2,800 potential fees that a bank can charge businesses for their account services. Account maintenance, depository services, ACH, wire transfers, and dozens of other services each have attributable fees that can be associated with them. But did you know that many of these fees can actually be negotiated or even removed altogether?
It’s challenging to keep track of all of the fees that your business might accrue through a bank. With the sharp decline of branch locations, you can expect even more moving forward. Thankfully, experts can negotiate and manage your company’s bank relationships on your behalf.
With over 25 years of experience, SIB’s treasury consultants help businesses like yours cut costs without cutting relationships. We work exclusively on a contingency basis – we only get paid if we save you money. We identify value in 98% of our reviews, saving our customers an average of 20-40% on average.
Banking relationships are changing, and there’s never been a better time to re-evaluate your relationship to your bank than now. Contact us today for more information about our services.