The Bank Swarm

"In the 1990s, a period of mergers in the financial industry, many banks promoted online services and closed branches. But industry studies showed that customers wanted personal contact when managing their money, and banks began opening more branches in a surge fueled by new players such as Commerce, which models itself as a retail store. "

As a result "the number of branches in the District [of Columbia] has jumped nearly 20 percent, from 193 to 230;" in Chicago "branches have increased by 50 percent since 2002;" Manhattan has seen "a 41 percent rise."

First of all, I personally feel that banking will move further and further into cyberspace in the next few generations, which will consequently make the brick and mortar branch increasingly obsolete and costly. I think we are already seeing this phenomenon take place with the explosion of online banks and online only accounts. INGDirect and HSBC are driving conventional banks, that may have been more hesistant or resistant to move online, to offer online only style accounts.

Although there is still a large base that grew up with their local bank branch, knew its employees and sought the advice of these bankers, the newest generation has a limited recollection of using bank branches and therefore less attachment. This generation places more emphasis on convenience and speed and less emphasis on personal touch or a human face. Add to this the overall trend towards self-management of financial portfolios as information is readily available to all and the need for a personal banker who has an office in your neighborhood is less important.

Second of all, I dont agree that the overpopulating of bank branches is a problem: one, banks want to make money just like retail and commercial interests and therefore locate in areas with growth opportunity in general - if anything, the increase in bank branches to an area should serve as a harbinger of prosperity; two, the concentrating of bank branches increases competition, which means higher deposit rates and lower loan rates; three, like all things driven by market forces, the number of bank branches will ultimately be reeled in by acquisitions/mergers, competition and good old supply and demand.