Will Physical Banks Close Due to Online Banking? Not Just Yet


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A smiling person sitting on their couch and looking at the phone in their hand.

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Don’t say goodbye to bank branch locations yet.

Key points

  • More and more people are doing the bulk of their banking online.
  • Physical banks still offer important and attractive features to account holders.
  • The future of the banking industry will likely result in a continuing move away from in-person banking, but it may take a while to get there.

It’s been awhile since I last had reason to set foot in a physical bank, and it wasn’t even on my own behalf. I managed a small nonprofit organization from 2020 into 2021 and made weekly bank trips to deposit donations and membership fees in the form of cash and checks. Since the bank I dealt with was extremely local, there was no way to deposit checks digitally (a feature many larger banks have made available through their mobile apps). Cash, of course, is a physical medium and so must be either taken into a bank for deposit or brought to a bank drive-through lane (or in some cases, deposited via ATM).

My own banking is exclusively online these days. In 2022, I opened bank accounts with an online-only bank that doesn’t even have branch locations. I’ve been with a large national bank for almost two decades, but I haven’t visited one of its branches in several years. I receive direct deposit paychecks into my checking account there, and otherwise make use of money transfer services to move money around. In my life, and perhaps in yours, physical bank branches are kind of, well…obsolete.

It’s not so surprising, as online-only banks have some pretty great features. They can offer higher interest rates on cash in savings accounts, as they don’t have to spend money maintaining physical branches. And they come with robust web presences, including user-friendly mobile apps that make money management easy, and dare I say, fun?

Based on the rise of online banking, you might be wondering if your neighborhood bank branch will close its doors soon. After all, according to Forbes, the number of bank branches has declined in the last decade, from 85,000 in 2012 to 72,000 in 2022. But the answer is no, not yet. And here’s why.

Technology isn’t yet adequate to replace the human experience

Put plainly, there’s still a lot that physical banks provide that online banks can’t yet replicate. First and foremost, if you want to speak to a helpful human, chances are, you’ll have a better chance of it if you visit a physical bank. While online banks offer means of contact, such as phone numbers and online chat features, including those “managed” by a chatbot, many people prefer the ease of strolling into a bank to speak to a person.

As technology evolves, online banks could edge out physical ones in this area, however. According to Forbes, banks are improving their chatbot services, and it’s this technology that will eventually kill physical banks. A chatbot is a software application designed to carry on a “conversation” with a bank client, answering questions, providing service options, and in some cases, eliminating the need for a real human interaction, be it virtual or otherwise. Right now, this technology isn’t quite sufficient to replace physical banks, but the future is fast approaching.

Physical banks offer useful services

In addition to giving you the chance to speak with a real live human (for now), physical banks also offer other valuable services for consumers. These include access to safe deposit boxes and notary services. It’s not possible to replicate either of these features over the internet. If you have something valuable to store, a physical bank is the perfect place for it, and notaries are vital as official witnesses to the signing of important documents.

The future likely looks different

While we still have physical banks for now, it seems likely that as chatbot technology and digital money management services improve, physical banks will slowly fade away. The rise of remote work has also served to change the banking landscape, with many bank employees (such as phone and digital chat customer service representatives) now working from home, rather than at a physical bank location.

It’s an interesting time to be observing the world of personal finance, and the only guarantee at this point is that banking will continue to change. Even just in the time I’ve been a bank account holder, I’ve seen huge changes. The first time I watched someone deposit a paper check by taking a photo of it with their smartphone, it blew my mind. When it comes to the future of banking and the divide between online and physical banks, stay tuned so you don’t miss a move.

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