Table of Contents
- What Is Branch Banking?
- Key Takeaways
- History and Current Landscape of Branch Banking
- Advantages of Branch Banking
- Important Note on Branch Networks
- Unit Banking vs. Branch Banking
- What Is the Difference Between Branch Banking and Chain Banking?
- What Is a Banking Desert?
- What Is Retail Banking?
- The Bottom Line
What Is Branch Banking?
Let me explain branch banking directly: it's when a financial institution runs storefront locations separate from its main home office, all to make things more convenient for you as a customer.
Since the 1980s, branch banking in the U.S. has seen major shifts because of a more competitive and consolidated financial market. One key change is that, starting in 1999, banks could sell investments and insurance right alongside their regular banking services, all under one roof.
Key Takeaways
Branch banking means setting up storefront extensions that deliver the same core services as the bank's main headquarters. Over the decades since the 1980s, it's adapted to a tougher national market, deregulation in financial services, and the rise of internet banking. If you're banking at a branch today, it's probably one of the 'big four': JPMorgan Chase & Co., Bank of America, Wells Fargo, or Citibank.
History and Current Landscape of Branch Banking
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 let well-capitalized banks buy or open branches anywhere in the U.S., even outside their home states. By then, most states had already allowed interstate branching.
In 1999, Congress got rid of laws that kept investment services separate from banking, and together with the 1994 act, this sparked the spread of branch offices all over the country.
After the 2008-2009 financial crisis, the industry consolidated, so for most Americans, branch banking now means dealing with one of those 'big four' banks.
Newer developments like internet banking and mobile apps have reshaped everything. A Morning Consult survey for the American Bankers Association shows that after COVID-19, mobile and online banking surged: 44% of consumers used mobile apps in 2021 (up from 33% pre-pandemic), and 26% used computers or laptops (up from 24%).
The pandemic also sped up branch closures, with nearly 3,700 shutting down in 2020. But banks can't just close branches freely; the Community Reinvestment Act of 1977 requires them to serve low- and moderate-income areas.
Advantages of Branch Banking
Branch banking lets a financial institution spread its services beyond its home base into smaller storefronts that act as extensions of the main operation. For some banks, this is a way to save costs: smaller spots handle key services, while bigger ones offer more.
As a customer, you get the benefit of face-to-face interactions, which provide a deeper connection than digital options can match.
While many people use apps for basics like checking balances or transfers, branches are where you go for things you can't do online, like withdrawing cash or using a safe deposit box. You can also handle complex transactions, learn about specialized products, or get financial advice there.
Important Note on Branch Networks
Branch banking networks have grown into multi-state systems where you can access your accounts from any office.
Unit Banking vs. Branch Banking
Unit banking is about a single, often small bank serving its local community without branches or connections to others. It's usually independent, but not always—some keep their own name even if owned by a larger holding company.
What Is the Difference Between Branch Banking and Chain Banking?
Chain banking happens when individuals or an entity control at least three independently chartered banks. Unlike branch banking, these chain banks are separately owned and not part of one single entity.
What Is a Banking Desert?
A banking desert is a neighborhood or census tract without any bank branches in it or within 10 miles of its center.
What Is Retail Banking?
Retail banking delivers financial services to individual consumers, not big institutions. You might know it as consumer or personal banking, covering things like savings and checking accounts, cards, loans, mortgages, and CDs.
The Bottom Line
Branch banking boosts convenience and access for you by offering the same services at multiple locations as the main office. Online banking is popular and handy for many, but branches provide that human touch you can't get digitally, plus cash access, advice, and a broader range of services.
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