Writer: Joey Garrand
3 min read February 2021 — As in many other industries, the pandemic has accelerated innovations in the banking sector. Specifically, banks have been forced to grow the digital side of their business and improve tremendously to meet the needs of clients in this seemingly virtual world. Such innovation certainly helps to improve efficiency and convenience, but it comes at a cost.
On Jan. 27, the Philadelphia Business Journal reported that TD Bank, Philadelphia’s second-largest retail bank, is closing 81 branches nationally, including 11 in the Philadelphia region. Why is TD Bank closing 7% of its locations? The lender’s expanding digital banking platform, combined with a significant decrease in foot traffic due to COVID-19 concerns, is making an abundance of physical locations less attractive. Of course, this trend was already taking place; it was simply accelerated by the pandemic.
Before the pandemic occurred, Michael Carbone, regional president of TD Bank, discussed with Invest: Philadelphia 2020 the growing focus on digital solutions. “We are seeing fewer customers come into our stores. Instead, they are using digital tools to conduct their transactions. The use of artificial intelligence (AI) is becoming a major player in understanding customer trends and needs. Technology allows us to better understand the needs of our customers and local community trends. It is also our job to provide our customers with innovations that allow them to bank the way they want. The challenges customers face today are far less than they may have been 15 or 20 years ago, and the ongoing introduction of new technologies has played a huge role in that.”
Although the closing of locations may seem like a step backward, this is simply the result of successful innovations. Other bank leaders also understand the importance of digital banking platforms going forward.
For instance, Jordan Space, Eastern Pennsylvania president for S&T Bank, explained the significance of the evolving digital banking space and its effects on physical locations in an interview with Invest: Philadelphia 2021. “We’ve seen a tremendous increase in digital usage. Prior to the pandemic there was already a technical shift, with some banks announcing branch closures and repurposing their retail system. I still believe there are people who want to use branches, but there is also the acceleration of digital banking. Some people who may have been somewhat resistant to that change before have now embraced it. We’ve maintained a relatively low branch count considering the size of our organization. We will selectively relocate some branches, which is ultimately decided by demand dynamics, but we will be very selective with this.”
Also in an interview with Invest: Philadelphia 2021, Chris Martin, Chairman and CEO of Provident Bank, describes the significance of its digital platform not only concerning the bank’s operations but also its budget. “Technology is definitely an integral part of this business. Forty-four percent of our bank’s expense this year will be on technology. Going forward, it boils down to refining our digital strategy and understanding the right balance between our digital channels and our branch environment. We are partnering with fintech solutions to add to our client service offerings. Banks our size traditionally rely on legacy off-the-shelf systems. We are planning to get unbolted from them. That is where we anticipate fintech solutions will help.”
The banking industry is transforming, and more branch closings across a variety of banks should be expected alongside the rapid growth of digital banking platforms. Even once the world returns to a somewhat normal state, most banking leaders agree that the digital transformation is here to stay.