Disappearing Bank Branches

As the number of bank branches has shrunk in recent years, so has the size of the new ones. It used to be that 20 or more employees were needed to staff a branch with an average size of 15,000 square feet. But now, a staff of 10 or fewer is common, and the average size is 5,000 to 7,000 square feet.

This trend is helped by automation and centralization of many bookkeeping functions, such as processing checks. Fancy trappings, such as marble lobbies and brass teller cages, are also history.

In the 1970s, the first generation of automated teller machines was used to augment the basic functions performed by human tellers. But customers have grown so familiar with them in recent years that banks are using them more often to replace entire branches.

Banks are awaiting the next generation of ATMs. They’re expected to be more powerful and to offer access to a wider range of bank services. IBM already markets an ATM that can cash checks to the penny, for example.

Yet consumers have been slow to give up entirely their need for the human touch in banking services. A survey last year by the trade newspaper American Banker found that 80% of people are using branches with the same frequency as two years before. Of those who were using them less, only half said it was because they had substituted machines for bank personnel.

The banking industry’s rule of thumb is that a branch needs $20 million in deposits to be profitable. But some analysts believe that branches with $10 million or less can operate in the black if the overhead is low and loan portfolios are good.

Strong loan levels are one reason that banks tend to keep smaller offices open in more affluent areas, and that has fueled controversy in minority and low-income neighborhoods, where activists have complained that banks are abandoning the areas.