In-store branches, a commonplace, popular banking format well into the 2000s, remain locked in what appears to be a slow, steady and intractable downward trend.
Though Federal Deposit Insurance Corp. statistics indicate about 2,500 in-store branches remain in operation, closures have outstripped openings by wide margins in recent years. In the 12 months ending August 15, banks shuttered 203 in-store branches against just 18 in-store openings. In the previous 12-month period, culminating August 15, 2023, in-store closings totaled 293 against another 18 openings.
As recently as 2020, there were about 4,000 in-store branches, according to the FDIC.
Many recent closures involved branches of regional banks that once specialized in in-store banking but have now largely or completely exited the space. In October, the Columbus, Ohio-based Huntington Bancshares announced plans to close a dozen Minneapolis-area branches housed in Cub supermarkets. Likewise, the Pittsburgh-based PNC Financial closed dozens of in-store branches in 2023.
In-store branches never fully achieved the mission that banks' set for them, according to Paul McAdam, senior director, banking and payments intelligence at J.D. Power. "Years ago, in-store branches were envisioned as sales centers, but this did not materialize," McAdam said. "When opening an account or obtaining advice … customers demonstrated a preference for using traditional branches. In-store branches evolved to primarily serve in-person, transaction-oriented customers."
Small-business clients, too, have opted to conduct most of their business in conventional branches. Indeed, higher-balance customers generally "do not want to bank in a grocery store," Achim Griesel, president of the Lincoln, Nebraska-based consulting firm Haberfeld said.
Community banks have also been closing in-store branches at a rapid clip. Griesel doesn't see the trend reversing. The in-store model, Griesel said, is "low on deposits and a lot higher on fees."
"If I were growing my network by in-store branches, every year my regulator would look at me and say, `Wow, you're becoming more reliant on fees," Griesel said. "I don't know many banks today that want to go that way."
In-store branches proliferated during their heyday in the 1980s, 1990s and early 2000s, because they offered customers the convenience of integrating basic banking tasks with a regular shopping trip, according to Eric Wheeler, senior director, product management at Chicago-based Syntellis Performance Solutions. Their rise "was driven by the demand for limited-service banking and check-cashing services," Wheeler said.
Yet the sector's largely transactional profile also proved to be its undoing. It made a course correction inevitable once online and digital banking options grew increasingly accessible and sophisticated. With the advent of mobile remote deposit capture, for example, "the notion of going to the grocery store to deposit a check and do some shopping faded," Richard Winston, financial services global industry lead at Slalom Consulting in Seattle, said.
"I believe what's behind the decline of in-store branches is the same force that is behind the decline of branches in general, digital banking services," McAdam said. "Fewer customers need to use branches to conduct banking transactions and open new accounts. This includes in-store branches."
Haberfeld's Griesel singled out the industry's
To be sure, some banks still emphasize in-store branches, but they are increasingly rare. "There are very few [in-store] specialists any more," Griesel said. Perhaps the best-known, the $9.2 billion-asset Woodforest Bank, headquartered in The Woodlands near Houston, maintains nearly 700 in-store branches. Woodforest had not responded to a request for comment at deadline.
For his part, Griesel doesn't expect in-store branching to disappear entirely. Beyond the handful of specialist banks, however, Griesel believes it will be limited to community banks that maintain a small number of in-store locations in order to round out their networks. "As a whole, I think it's going to keep shrinking," Griesel said.
