Charted: Why Branch Banking Is Dying in America
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Why Branch Banking is Dying in America

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the end of branch banking

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The Briefing

  • In the last decade, 27,943 bank branches have closed in the U.S.
  • The increasing prominence of mobile and digital banking is leading to lighter demand for in-person banking services

Branch Banking Is Dying

The 2008-09 financial crisis was triggered by reckless banking practices that dominoed into the global economic system.

Though the world has since recovered and moved on from the crash, the banking system that ignited such damage has in some ways never been the same.

Take U.S. branch bank net openings, which is undergoing a notable trend reversal. According to the Federal Deposit Insurance Corporation (FDIC), for 11 years and counting, the number of U.S. bank branch closings has exceeded the number of branch openings.

YearOpeningsClosingsNet
20201,2512,788-1,537
20191,4603,090-1,630
20181,5633,134-1,571
20171,0652,986-1,921
20161,0842,826-1,742
20151,2092,689-1,480
20141,3512,996-1,645
20131,4702,500-1,030
20121,6232,570-947
20111,9012,364-463
20101,8972,892-995
20093,4572,877+580
20083,5622,300+1,262
20075,1682,024+3,144
20063,7591,609+2,150
20053,9472,026+1,921
20044,0952,217+1,878
20033,4042,271+1,133
20022,5562,469+87
20013,1932,982+211
20003,2743,826-552

There are fewer banks in America with every passing year—in 2020 alone, a deficit of 1,537 branches was recorded, almost 2% of the roughly 85,000 branches in the country.

Branching Towards Digital

Unsurprisingly, the fall in branch banking coincides with the adoption of digital activity in the banking space. And this is especially true for younger, tech-savvy generations.

Undoubtedly, convenience is a big factor, as now nearly 50% of traditional branch banking activity can be conducted online. As a result, mobile banking activity occurs most frequently on one’s couch or bed.

The Good Ol’ Days

The decline in the number of branch banks also reflects the overall downturn of the broader banking industry. In that, the industry faces a slew of challenges including:

1. Contracting net interest margins
Net interest margins are the difference between the interest income generated for financial institutions and the amount they pay to lenders.

2. Fintech industry disruption
Fintech is bridging the gap between finance and digitization, sleek modern technologies enable firms to optimize financial services and the customer experience.

3. More stringent reserve ratio regulations
Reserve ratios are a portion of reserves that a financial institution must hold onto rather than invest or lend.

Investors are fleeing to other avenues as is evident in the stock price performance of the big U.S. banks. As a result, underperformance has been a common theme in the last decade.

 Number of U.S. BranchesStock Price Performance
(Jan 2011 - Jan 2021)
Change Relative to S&P 500
JPMorgan Chase5,016208%+17%
S&P 500191%
Bank of America4,265116%-75%
U.S. Bancorp3,06776%-115%
Citigroup70425%-160%
Wells Fargo5,195-2%-193%

What Lies Ahead

Yet, despite the progress towards digital banking, the U.S. is still a laggard. For instance, large cohorts of Americans still use cash as a frequent transaction method, while the country’s mobile payment penetration rates are lower than most developed nations.

As a percentage of smartphone users, 29% of Americans have adopted mobile payments. A tepid figure relative to Denmark at 41%, and India at 37%.

America’s fierce economic rival, China, has a whopping 81% of smartphone users that have adopted mobile payments. That’s 801 million people, compared to America’s 69 million. Adjusting for population disparities, China still has 2.7x more mobile payment users.

If the U.S. follows on the path of other more fintech savvy countries, visiting a bank branch and using physical cash may become as increasingly antiquated as writing a check is today.

Where does this data come from?

Source: Federal Deposit Insurance Corporation
Notes: This data was updated last on January 8, 2021

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Datastream

Ranked: These Are 10 of the World’s Least Affordable Housing Markets

An analysis of 90+ major cities reveals which ones are the least affordable housing markets based on their price-to-income ratio.

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The Briefing

  • For the 12th year in a row, Hong Kong is the world’s least affordable housing market, according to Demographia’s ranking of 92 cities in select countries
  • Sydney, Australia moves up one spot from last year’s ranking to take second place

These Are 10 of the World’s Least Affordable Housing Markets

It’s become increasingly difficult for middle-class families to purchase a home over the last few years—and the global pandemic has only made things worse.

According to Demographia’s 2022 Housing Affordability Report, the number of housing markets around the world deemed “severely unaffordable” increased by 60% compared to 2019 (prior to the pandemic).

This graphic looks at some of the least affordable housing markets across the globe, relative to median household income. The report covers 92 different cities in eight nations: Australia, Canada, China, Ireland, New Zealand, Singapore, the United Kingdom, and the United States.

The Least Affordable Housing Markets

Before diving in, it’s worth outlining the methodology used in this report, to help explain what’s classified as a severely unaffordable housing market.

To calculate affordability, a city’s median housing price and divided by its median household income. From there, a city is given a score:

  • A score of 5.1 or above is considered severely unaffordable
  • 4.1 to 5.0 is considered seriously unaffordable
  • 3.1 to 4.0 is considered moderately unaffordable

All the cities on this graphic are classified as severely unaffordable⁠—and, for the 12th year in a row, Hong Kong takes the top spot as the world’s most unaffordable housing market, with a score of 23.2.

Housing MarketNationScore
Hong Kong🇭🇰​ Hong Kong (SAR)23.2
Sydney, NSW🇦🇺​ Australia15.3
Vancouver, BC🇨🇦​ Canada13.3
San Jose, CA🇺🇸​ U.S.12.6
Melbourne, VIC🇦🇺​ Australia12.1
Honolulu, HI🇺🇸​ U.S.12.0
San Francisco, CA🇺🇸​ U.S.11.8
Auckland, AUK🇳🇿​ New Zealand11.2
Los Angeles, CA🇺🇸​ U.S.10.7
Toronto, ON🇨🇦​ Canada10.5

One reason for Hong Kong’s steep housing costs is its lack of supply, partly due to its lack of residential zoning—which only accounts for 7% of the region’s zoned land. For context, 75% of New York City’s land area is dedicated to residential housing.

Sydney moved up one spot this year, making it the second most expensive city to purchase a home on the list, with a score of 15.3. Besides Hong Kong, no other city has scored this high in the last 18 years this report has been released.

There are several theories for Sydney’s soaring housing rates, but industry expert Tom Forrest, CEO of Urban Taskforce Australia, boils it down to one fundamental issue in an interview with Australia Broker—supply isn’t keeping up with demand:

“Housing supply has been consistently not meeting demand in the Greater Sydney and across regional New South Wales…if you have supply consistently not meeting demand then the price will go up. That’s what happened and we’re seeing it in abundance.”Tom Forrest, CEO of Urban Taskforce Australia

The COVID-19 Impact

Middle-income earners were already feeling the squeeze prior to the global pandemic, but COVID-19 only exacerbated housing affordability issues.

As people began to work from home, high-income earners started to look for more spacious housing that wasn’t necessarily in the city center, driving up demand in suburban areas that were relatively affordable prior to the pandemic.

At the same time, supply chain issues and material costs impacted construction, which created a perfect storm that ultimately drove housing prices up.

But with interest rates rising and COVID-19 restrictions easing around the world, some experts are predicting a market cool down this year—at least in some parts of the world.

>>Like this? Then you might like this article: How Much Prime Real Estate Could You Buy for $1M?

Where does this data come from?

Source: Demographia
Details: The affordability score is calculated by taking a city’s median housing price and dividing it by the median household income. Anything over 5.1 is considered severely unaffordable
Notes: Data includes 92 metropolitan markets across eight countries; Australia, Canada, Ireland, Singapore, China, New Zealand, the U.K., and the U.S., as of the third quarter of 2021. Many European countries, along wth Japan, we excluded from the dataset, because information on median income was not readily available.

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Datastream

Poll: Inflation is the Top Financial Concern for Americans

Many Americans are feeling the sting of inflation as everyday items like food and fuel have seen big price increases.

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The Briefing

  • Inflation has quickly become the top financial concern for American families
  • Compared to 2021, far fewer Americans believe their financial situation is improving

Poll: Inflation is the Top Financial Concern for Americans

A recent survey by Gallup discovered that inflation has become the top financial concern for Americans, surpassing other issues like low wages and housing costs.

While this result may not be too surprising, it is interesting to see how today’s concerns compare to that of previous years. For reference, the Consumer Price Index (CPI) has grown 8.3% between April 2021 and April 2022, representing a near 40-year high.

Poll Results

Results were collected in April 2022 and are based on the responses of over 1,000 U.S. adults. In this case, the specific question was: What is the most important financial problem facing your family today?

TrendApril 2022April 2021April 2020April 2019
Inflation32%8%3%6%
Low wages11%10%11%11%
Gas prices10%1%----
Housing costs8%9%9%8%
Health care costs7%8%8%17%

Percentage of respondents. Includes the top five categories, based on April 2022 results.

Based on these results, we can see that inflation began to gain momentum in early 2021. Rising gas prices, which are a significant contributor to overall inflation, also popped up in 2021.

Implications

Significantly fewer Americans feel confident about their financial situation due to the rising cost of living. This was captured in the same Gallup survey referenced above.

Income Group20222021Percentage point decrease
Upper 50%28%-22
Middle48%39%-9
Lower63%45%-18

Percentage of respondents who say their personal financial situation is improving.

The largest decreases were seen among the upper and lower income groups.

Upper income families tend to own more financial assets like stocks and bonds. An inflationary environment, especially when combined with rising interest rates, can eat away at the returns generated by these assets, which could explain this cohort’s drop in optimism.

Lower income families, on the other hand, are more likely to be struggling already. In fact, a 2017 report found that six in 10 Americans don’t have $500 in savings. With this in mind, it’s easy to see how an increase in the price of food or gas could cause worry.

Where does this data come from?
Source: Gallup
Notes: Interviews conducted April 1-19, 2022, with a random sample of 1,018 adults, aged 18 and older, living in all 50 U.S. states and the District of Columbia. For results based on the total sample of national adults, the margin of sampling error is ±4 percentage points at the 95% confidence level.

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