September 21, 2012

Bank branches will eventually disappear entirely as more customers interact with their financial institutions through online and mobile channels, predicts ratings agency Fitch.

According to a new report titled, "U.S. Banks: Rationalizing the Branch Network," Fitch expects both fewer numbers of branches and different types of branches to inhabit the banking landscape going forward. The elevated cost structure of most banks is prompting them to re-think and rationalize expenses, particularly branch networks, which is one of the most significant expenses in the industry, Fitch says.

Fitch says as demographics change and more consumers interact with their banks using digital channels and ATMs, banks will increasingly focus on connecting with their customers in those channels.

The ratings agency is also forecasting increased technology spending by banks over the near to intermediate term to improve efficiency and streamline operations.

"While over the near term these additional technology expenses may offset cost savings from culling bank branches, longer term it should improve earnings and, therefore, returns to shareholders," a portion of the report states. "Banks unable to adapt their branch models quickly enough may suffer declining market share and customer attrition."

Overall, branch transaction volumes are slipping about 5 to 10 percent per year, according to various reports.

[See Also: Bank Branches Are Dead]

ABOUT THE AUTHOR
Bryan Yurcan is associate editor for Bank Systems and Technology. He has worked in various editorial capacities for newspapers and magazines for the past 8 years. After beginning his career as ...