Why do banks continue to build so many new brick-and-mortar branches?

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  1. tipstoretireearly profile image80
    tipstoretireearlyposted 11 years ago

    Why do banks continue to build so many new brick-and-mortar branches?

    In a world where online banks offer higher interest rates on deposits and more convenience, why do banks continue to build so many new brick-and-mortar branches?  Are there that many new customers?

  2. pitzele profile image72
    pitzeleposted 11 years ago

    Great question.   I would say that, for the most part, they prefer to lease existing locations, as opposed to purchasing the land and constructing the building.  However, to address your question, banks (like every other retail establishment out there) are always trying to establish and strengthen their "brand".   The signage is advertising in and of itself, and the back offices keep track of year over year expenses/profit for each individual branch, so that if any branch is underperforming, they can close it.  This point brings us back to the leasing vs. buying.  One provides you an out at the end of the lease, whereas purchasing requires a real estate agent, title company, lawyer, etc. 

    Additionally, most banks - in particular, larger banks - are trying to establish a more significant online presence.  The mobile banking trend is hitting the big banks and they are certainly trying to cash in on what they see as the next "big thing".  However, without a physical presence (i.e. the brick and mortar buildings), you risk sacrificing convenience, which is what everyone claims they are shooting for in the first place.

    1. teaches12345 profile image77
      teaches12345posted 11 years agoin reply to this

      I wander if it also helps with their tax or investment portfolio to build bank branches each year.

  3. cygnetbrown profile image81
    cygnetbrownposted 11 years ago

    In my experience, bankers are a conservative lot. They do not have a tendency participate in anything that seems trendy. Bankers tend to prefer to do things in traditional ways. Building bank branches traditional. On-line banking is still too trendy for many bankers.

  4. LandmarkWealth profile image68
    LandmarkWealthposted 11 years ago

    There are still too many people who want to work face to face with someone on things such as a mortgage, HELOC, or even investment related issues.  There are still alot of people left that want to meet face to face.  The other issue is brand recognition.  Seeing a place routinely helps alot with that.

    1. pitzele profile image72
      pitzeleposted 11 years agoin reply to this

      Precisely.  The online presence is nice, but tends to be geared to an existing customer base for simple issues, such as cash-based transactions, loan apps, etc.  Closing a loan or investment/insurance conversations usually require face to face.

  5. philli profile image80
    philliposted 11 years ago

    I think it is a marketing tool. Do you join the bank that is on every corner or the one you have to drive 45 minutes to? The more people that join out of convenience the more money the bank can make.

  6. profile image0
    alloporusposted 11 years ago

    Real estate has always been a good long-term investment, even for a bank

 
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