Physical banks have been disappearing in the United States for years, but during the Covid-19 pandemic, banks have doubled the rate of branch closures, according to new data from the National Community Reinvestment Coalition (NCRC).
And Baltimore’s branch closure rate, the group reports, is nearly the worst in the country, with the region losing 14% of its bank branches between 2017 and 2021.
Only the Portland, Oregon metro area had a higher rate of closures, with nearly 20% of its bank branches closed during that five-year period.
Hartford, Connecticut tied Baltimore with a 14% loss.
Even with the global movement of the industry online, the report’s authors say that storefront banks remain a vital financial services lifeline for many.
“Small businesses still rely on in-person banking despite the proliferation of online alternatives,” they wrote in “The Great Bank Consolidation and Accelerating Branch Closures Across America“, published today.
“And shrinking branch networks threaten local economic activity that is essential to creating wealth in marginalized communities,” they noted.
Apps may be the future, but there are some things they can’t do.
“In communities that have historically faced higher hurdles to banking and struggled to build wealth, the personal relationship between local business owners and local branch bankers can be key to securing a credit or renegotiate loan terms,” said NCRC senior director Jason Richardson. research and one of the authors of the study.
Consolidation and Covid
Mergers and acquisitions have led to most branch closures, as well as a shift to Internet transactions.
According to the report, two-thirds of banking establishments have disappeared since the early 1980s, falling from nearly 18,000 in 1984 to less than 5,000 in 2021.
Between 2017 and 2021, 9% of all branches in the United States closed, representing a loss of approximately 7,500 physical locations.
The pandemic has dramatically accelerated the trend, the authors found.
Banks have closed more than 4,000 branches since March 2020. This doubled the rate of closures in the 10 years before the pandemic.
As for the impact of this trend, it falls hardest, unsurprisingly, on minorities and the less well off.
A third of branches closed from 2017 to 2021 were in low-to-moderate and/or minority income neighborhoods, where access to branches is crucial to ending inequity in access to financial services, according to the report.
Without nearby branches, people are more likely to be ‘unbanked’ or ‘underbanked’.
And that means turning to alternative financial providers who step in to fill the void – unregulated actors such as payday lenders, auto loan title lenders, or check cashing places that charge exorbitant fees.