What Are Some Reasons That Banks Close Branches?


Quick Answer

The shift to online transactions and profit concerns make up the primary reasons behind the closing of bank branches. In the United States, banks rarely close branches due to other reasons, according to SNL Financial.

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Full Answer

Many people conduct banking transactions online and rarely have a need to visit a local branch. Though local branches offer convenience to many, they do not attract customers who can complete a transaction online in a shorter amount of time. This trend is not limited to small transactions, as customers can even complete some significant transactions, such as mortgage applications, online. All of these factors result in certain branches receiving very few customers, making them prone to closures.

Banks may opt to close branches to cut costs and reduce financial troubles. The maintenance of the banking infrastructure for a particular branch can sometimes cost more than what it brings in from customers. In particular, branches located in areas where customers typically prefer to bank online may end up losing money, often resulting in the bank choosing to close the location. Many locations, however, attract enough customers to remain profitable.

Closing branches also reduces the number of employees, cutting the salaries and wages that the bank must pay. However, closures can sometimes decrease the trust and goodwill consumers have in a bank, regardless of the widespread availability of online banking services.

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