Dead or Alive? Closing branches spotlight digital vs. in-person banking needs

What does the future of banking look like? It’s a timely question to ask in the wake of COVID-19, which pushed a rapid adoption of already-growing digital banking trends, tools and platforms.

As vaccination rates rise, as restrictions lift, and as the pandemic recedes further into the background, it’s worth asking whether customers will return to their old (largely in-person) banking habits, or if all-digital banking has officially taken its place as the go-to option for the average consumer.

The Traverse City Business News checked in with three local banks and credit unions to get their insights on the changing world of banking – and to learn how “the little guys” are working to stay competitive with the major players as the market shifts.

Nationwide trends

Industry-wide, projections for digital banking are quite rosy – and predictions for brick-and-mortar branches are quite the opposite. According to an April report from Research and Markets, the digital banking platform market is predicted to grow at a compound annual growth rate of 11.2% in the next five years.

Comparatively, retail banking appears to be bleeding. A market tally by S&P Global Market Intelligence indicated that banks permanently closed 3,324 branches in 2020 – a historic record. While banks have been consolidating their branch operations for years, the pandemic accelerated the trend considerably. Almost 1,000 more bank branches closed last year compared to 2019, when S&P tracked 1,391 closures.

At the same time, S&P also notes that banks opened 1,040 brand-new branches in 2020, indicating that there might still be some life in the idea of in-person banking. Still, every state experienced a net loss of bank branches, with several states – California, New York, Pennsylvania, Ohio and Illinois – seeing net losses of more than 100 bank branches each. Michigan was in the middle of the pack, tracking a net loss of 57 brick-and-mortar bank locations last year.

Local innovations

According to northern Michigan banking experts, the shift to digital is an inevitable evolution of the banking industry – and one that even rural-leaning markets are not exempt from. As online and mobile platforms change the day-to-day banking and money management habits of personal and business banking customers alike, local pros say brick-and-mortar remains an important part of the equation – and that the pandemic and industry disruptors have actually, if anything, underlined that importance.


Molly VanderHorn, vice president of treasury management for State Savings Bank, says the bank has experienced an “over 50% increase” in customers using mobile deposit services since last March, with the acceleration hitting both the personal and commercial banking sides.

Dixie Hoeh, vice president of retail banking and marketing for Honor Bank, says the institution has grown its app user base by about a quarter since the start of the pandemic, with overall app usage surging roughly 40%.

And Zach Eychaner, senior vice president of strategy innovation for 4Front Credit Union, touts “about a 300% increase in people doing deposits through their phone.”

Eychaner says 4Front read the writing on the wall years ago, that the banking world at large was skewing toward more digital-centric solutions. The credit union has invested heavily in new technologies in the years since, from interactive teller machines at its branches (ATMs that allow customers to connect with bank representatives via video chat, for a more personalized banking experiences) to a robust mobile app. Those investments paid dividends during the pandemic – especially early on when banking branches had to close.


VanderHorn reports a similar pre-pandemic investment in digital services at State Savings Bank, particularly on the commercial side. Commercial customers, she says, have traditionally been more likely to do their banking in person – and to resist the adoption of digital banking tools – than personal banking customers.

VanderHorn notes that, before the pandemic, State Savings Bank had put together “a full treasury suite of products, which is essentially all digital,” intended to help businesses manage everything from investment decisions to ACH transfers remotely. The pandemic pushed more businesses to adopt those products.

“Fortunately, we’ve invested a lot in our technology, and have really been able to lead in that as a community bank,” VanderHorn said. “We had a lot of the digital tools in place (already). But the outcome of all of this is that, for people who weren’t using a digital channel for banking, it really forced them to have to learn it, and use it maybe a little more quickly than they were anticipating. The crisis really just accelerated all that we already had.”

The investments are continuing, too. VanderHorn says State Savings Bank added e-signature capabilities, enabling customers to handle major transactions or even open accounts without having to visit a branch.

Honor Bank also recently adopted the e-signature, and is working on a new initiative that will enable customers to open new accounts with the bank – online, without visiting a branch – in five minutes or less.

Finally, 4Front added a new credit score feature and embraced integration with MemberPass, which Eychaner describes as “a secure, self-sovereign digital identity that allows us to verify members quickly and protect them,” without the need for security questions, scanning IDs, or other time-consuming procedures.

In-person banking: Dead or alive?


These new technologies will all have the effect of making mobile banking more convenient and far-ranging, which will in turn reduce the scenarios in which a customer might need to visit a brick-and-mortar location. Still, VanderHorn, Eychaner and Hoeh all agree that branch banking isn’t dead; its role is just changing.

Hoeh, for instance, notes that in-person banking remains the preferred option for many older customers, particularly those in the Baby Boomer demographic or older. She also gets the sense that customers – even younger ones – “like to know we’re here” to lend a hand with more complex or in-depth banking matters.

VanderHorn, meanwhile, sees most consumers using a blend of digital and in-person banking services going forward – especially as pandemic fears dissipate.

“I think people, through all that we’ve been through, are craving a normal experience again,” VanderHorn explained. “There’s still a demand for that in-person experience. We’re humans. We want to deal with people.”

The advantage of being a community bank – and being in a community – is that a lot of customers still like to be able to have more of that boutique approach, VanderHorn says.

“They like to have their person that they’re able to call, and not be put on hold or to have to go through some 1-800 number or call service,” she said. “They like that direct line and that direct approach. They like to have a person.”

Eychaner concurs with VanderHorn, noting that banks with a local branch presence are simply better equipped to offer the personable, relationship-driven banking services that many customers are seeking – especially for bigger banking processes like buying a house or selling a business.

“When we reopened our branches (after the spring 2020 closure), we saw lobby traffic tick right back up again,” Eychaner said. “People want to be able to come in to open accounts; they want to be able to come in to get support. That really hasn’t changed.”

While people are using digital more for simple transactions – checking balances, a quick check deposit – they still want to come in, Eychaner says.

“So that hasn’t changed our growth strategy at all,” he said. “We will continue to expand and input branches into new communities. Because what we’ve found is that members want technology, until they want a person. And when they want a person, we need to be there.”

That in-person aspect could remain an important differentiator as all-digital banking apps like Chime and Ally continue to disrupt the banking market.

Eychaner admits that these types of apps have forced local banks to up their game. 4Front recently accelerated its deposit process to make money available to customers “up to two days quicker” than what used to be standard – a move prompted by the lightning-quick direct deposit capabilities touted by Chime.

“If someone like that is gaining a foothold, if people are finding value there, how can we create that same value?” Eychaner said, noting the importance of traditional banks learning from their disruptors. “But the flip side of that is still the relationships that we build, and the commitment that we have to the communities and to the people.”

Eychaner says it’s possible to be completely digital, but for those with questions or who need support, people are the answer.

“We have people here who you can pick up the phone and call. Or you can very easily walk into a branch and say, ‘I need some help,'” he said. “You’re not going to get that from a Chime or from an Ally.”