The large banks in America are closing hundreds of branches. Bank of America, Citigroup and JPMorgan, already have closed 389 branches altogether since the third quarter of last year. Why are the banks shutting down branches?
26 October, AtoZForex – Before the financial crisis, Bank of America had 6000 branches, now it got reduced to 4629 branches with another 112 financial centres being cut from last year. However, more cuts is expected with the number of bank layoffs being estimated at 30 percent the the upcoming period. Shutting down branches and reducing headcount is considered to be an Uber moment for US banks. Yet, what drives this trend?
Why are so many bank branches being closed?
CFO of Bank of America Paul Donofrio stated that this trend of shut down is part of a “shift to self-served digital channels, mobile, online, and ATM”, according to his statement in a 3Q earning call. He thinks this would be better for customers and shareholders too as the bank reported 21 million mobile banking active users and 18 percent of deposit transactions are done through mobile phones. The recent research has revealed that banks should start utilizing social media in a more effective way, one of the leading banking sector is that of Italy. Adding to this discussion, the CEO of Bank of America, Brian Monihyan said:
“So it’s a quality versus quantity and making sure we understand, I’d say we went from seven million visits probably four to five years ago to six to five. But those five are of a higher quality, and we think that’s important.”
This Uber moment for US banks is not only about branches, but staff too. Bank staffing levels have already decreased from the pre-financial crisis peak, as the number of bank tellers has been reduced by 15 percent since its peak in 2007.
What are the Banks’ anticipations in terms of layoffs?
Its expected that 40 to 50 percent of staff reduction from the pre-crisis highs, according to Citi analysts. The job cuts is expected to increase up to over 1.8 million job losses from the present levels in the banking sectors in the US and Europe in the next 10 years. Not long ago, former Barclays CEO Antony Jenkins predicted that pressure in the technology industry, he said:
“Will compel banks to significantly automate their business” and “that the number of branches and people may decline by as much as 50% over the next years.”
According to the Head of digital finance at Goldman Sachs, Harit Talwar believes that the fast pace of digital technology development is making the bank branches redundant. Do customers need a brick and mortar branch network to get their banking activities done? These traditional branches have become a costly burden for the banks, in her opinion.
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