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Mobile banking, demographics make financial institutions rethink branch strategy

Is the era of mobile banking prompting banks to scale back their real-world presence?

U.S. banks and savings and loans shut more than 2,000 branches in 2012, the Wall Street Journal reported last month, citing the research firm SNL Financial. The research firm AlixPartners expects total branches to decline from 93,000 to 80,000 over the next decade, the paper said.

PNC Financial Services Group Inc. is closing 200 branches this year out of nearly 3,000. That includes two midstate branches scheduled to close July 19: the Parkview Branch at 886 Plaza Blvd. in Lancaster and the Windsor Park branch at 5288 Simpson Ferry Road in Lower Allen Township, said PNC spokeswoman Marcey Zweibel.

Research shows people’s banking habits are changing, Zweibel said. PNC is evaluating its branch network and “making adjustments as needed,” she said.

Susquehanna Bank, based in Lititz, is closing 16 of its roughly 260 branches, including five in the midstate, spokesman Matthew Kemeny said.

The midstate closures will take place Oct. 4, and branch customers are being redirected to branches nearby, he said. No job cuts are expected, he added.

Banks adjust their branches in response to market shifts, said Janak Amin, Susquehanna Bank executive vice president and Pennsylvania market CEO.

At Susquehanna, mobile banking transactions are up 22 percent since the start of the year, he said.

“That is a huge shift,” he said.

Other shifts occur because places evolve. When Giant built a new supermarket on Linglestown Road in Susquehanna Township a few years ago and closed its older location, traffic patterns changed, Amin said. New housing developments shift things further, he said.

A bank’s business model is another factor. Lower Paxton Township-based Centric Bank offers “Doctor Centric,” a division offering concierge banking service for medical professionals; last month, Centric opened its fourth branch, across the street from Penn State Milton S. Hershey Medical Center in Derry Township.

But business models and neighborhood changes have been part of banking for ages. Mobile banking is relatively new.

According to a March report by the Federal Reserve, 28 percent of mobile phone owners and 48 percent of smartphone owners used mobile banking in 2012, up from 21 percent and 42 percent, respectively, in 2011.

Twenty-one percent of mobile phone owners used their phones to deposit a check, twice the rate in 2011, the Fed said.

Overall, “the use of mobile banking has increased by more than a third in the past year, and it appears likely to continue to increase,” the Fed said.

Amin said he expects mobile banking to “drive the future” of the industry.

Yet that very trend is what makes a bank’s branches all the more crucial, said James Gibson, president and CEO of Integrity Bank, based in Camp Hill.

Banks have to offer a full range of online and mobile options for customer convenience, but those products are “all pretty much the same” from bank to bank, Gibson said.

“Nobody chooses a bank because of that,” he said.

What drives customers to a bank are things like location, hours, products and word of mouth, he said. Since almost all accounts are opened in person at a branch, having prime locations that can generate a large volume of business creates a “long-term strategic advantage,” he said.

Integrity, founded in 2003, has seven branches, all in the midstate. In the next 13 months, it will open three more, Gibson said: one on Fruitville Pike in Lancaster County and two in York County, on Route 74 by the West Manchester Mall and on East Market Street in Springettsbury Township.

Integrity is exceptionally careful in choosing locations, he said.

“It’s a science, how you pick them out,” he said.

And banks still need branches for transactions, such as business loans, that require information beyond what numbers can provide. Bankers need detailed first-person knowledge of local conditions, and in-person interviews help them form judgments about applicants’ character and the context of their business.

“Both the bank and the business person see the value of doing this face-to-face interaction,” Amin told the Business Journal in an April 19 article.

Conventional wisdom on branches keeps shifting, Gibson said. In the 1990s, they were thought to be out of date. In the early and mid-2000s, branches proliferated. Now banks are pruning again and refining a “mixed” model, he said.

So what should banks be doing today? Opening branches, closing them, or relocating them?

“All three can be right,” he said. “All three can be wrong.”

Editor’s note: This item was modified from its previous version to correct the date on which midstate closures will take place.

Tim Stuhldreher

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