Mobilizing the Banking Industry

March 24, 2017


“Banking is necessary, banks are not”. This is a quote from former CEO of Microsoft, Bill Gates in 1994. Today, it is no secret that banks throughout the country are actively closing their branches. The FDIC has recorded the lowest number of national branches in a decade. With these closures, banks are attempting to move towards a primarily digital and mobile banking system. But with this change, comes the risk of accounts being hacked. In a world where cutting costs is a primary focus, branches seem to be the ones getting cut.


Since 2015, the number of nationwide bank branches has declined by about 2.5%, per the FDIC. Some of the commercial banks that have closed the most branches include (from most to least): Bank of America, Wells Fargo, Citibank, and Capital One Bank. The nation’s largest commercial bank, JPMorgan Chase & Co., has closed 144 locations nationally since 2015. That’s about 2.5% of their footprint.

Traditionally, a branch costs approximately $2-4 million to set up, and an additional

$200,000-400,000 to operate. Although each JPMorgan Chase & Co. branch generates approximately $1 million in annual profit, it takes about 10 years to fully reach its potential. However, banks are now choosing to spend their brick & mortar money on developing mobile banking. With the rapid expansion of the digital age, bank executives have concluded that it is more cost effective for them to focus money on digital banking, rather than the brick & mortar locations. Since small businesses make deposits more frequently than large businesses and personal consumers, they prefer to do so face-to-face with a teller. JPMorgan & Chase Co. had to hire more tellers when consumers complained about there not being enough service in existing branches. However, a study has shown that about 80% of consumers like having a physical bank branch to go to, but only about 20% of consumers use the branch. Looking at this statistic, banks have clearly started their movement towards mobile and digital banking.

With the surge of the digital age, mobile technology is becoming increasingly dominant in the banking industry. Banks have begun to stray away from the bricks and mortar theory of banking, and have started moving towards the bricks and clicks theory. Mobile and online banking gives consumers access to pay their bills, check their account information and balances, or even deposit a check from home or on the go. Only about 18% of consumers age 60 and older are using mobile banking, as compared to 67% of millennials. This number is bound to increase over the next few years due to approximately 85 million millennials coming of

age. However, with this advancement of technology, comes an advancement of a different kind - Hackers.


No matter how advanced technology gets, there will always be people who find ways to breach the security for any digital market. In this case, hackers attempt to gain access to consumers’ personal and business accounts.  In November of 2015, the U.S. Justice Department accused several hackers of targeting and stealing user information from JPMorgan Chase & Co for approximately 76 million households, and 7 million small businesses.  A nonprofit organization in San Diego named

The Identity Theft Resource Center says that they tracked 781 data breaches in 2015. They reported that at least 71 of these breaches involved banking, credit, or financial companies, which resulted in more than 5 million records being exposed.

Along with JPMorgan Chase & Co., companies such as Citibank, Citizens Bank, TD Bank, M&T Bank, and other financial institutions were targeted. So, although mobile and internet banking is taking the industry by storm, there are still dangers that comes with these advancements.


With banks closing branches, mobile and digital banking may be the next generation of financial institutions. Along with this advancement in the industry, security needs to be a primary focus. Technology does wonders, but there can still be glitches, failed servers, and security breaches. So, although the physical presence of banks will never fully go away, it is dwindling down more and more each year and shifting to a more online and mobile interface.


When all said and done, by no means does the information provided insinuate that your branch(es) will close. Each branch’s parent company has the final decision on the closure of its branches. If your branch is in a good location, and has good annual deposits (about $60 million or above), then I would say that the branch will most likely remain open. If you have questions or concerns about your branch, its deposits, or the market, I encourage you to reach out.



David Laiter


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