Datastream

Why Branch Banking is Dying in America

Published

4 months ago

February 9, 2021

Aran Ali

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.

Year	Openings	Closings	Net
2020	1,251	2,788	-1,537
2019	1,460	3,090	-1,630
2018	1,563	3,134	-1,571
2017	1,065	2,986	-1,921
2016	1,084	2,826	-1,742
2015	1,209	2,689	-1,480
2014	1,351	2,996	-1,645
2013	1,470	2,500	-1,030
2012	1,623	2,570	-947
2011	1,901	2,364	-463
2010	1,897	2,892	-995
2009	3,457	2,877	+580
2008	3,562	2,300	+1,262
2007	5,168	2,024	+3,144
2006	3,759	1,609	+2,150
2005	3,947	2,026	+1,921
2004	4,095	2,217	+1,878
2003	3,404	2,271	+1,133
2002	2,556	2,469	+87
2001	3,193	2,982	+211
2000	3,274	3,826	-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. Branches	Stock Price Performance (Jan 2011 - Jan 2021)	Change Relative to S&P 500
JPMorgan Chase	5,016	208%	+17%
S&P 500		191%
Bank of America	4,265	116%	-75%
U.S. Bancorp	3,067	76%	-115%
Citigroup	704	25%	-160%
Wells Fargo	5,195	-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

Visualizing the World’s Population by Age Group

33% of the world’s population is under 20, making young people the largest demographic worldwide. But this might not be the case forever.

Published

1 week ago

June 16, 2021

Carmen Ang

The Briefing

According to the United Nations, the global median age has increased by 7 years since 1950, from 24 to 31
That said, young people accounted for 33% of the global population in 2020, making them the largest demographic across the globe

Visualizing the World’s Population, By Age Group

An aging population can have far-reaching consequences on a country’s economy.

With this in mind, today’s graphic looks at the age composition of the global population in 2020, based on the latest figures from the United Nations.

The Global Age Composition

Our global population is getting older, largely because of increasing life expectancies and declining birth rates.

In 2020, more than 147 million people around the world were between the ages of 80-99, accounting for 1.9% of the global population.

Age Group	Number of People (2020)	% of Global Population
<20 years	2.6 billion	33.2%
20-39 years	2.3 billion	29.9%
40-59 years	1.8 billion	23.1%
60-79 years	918 million	11.8%
80-99 years	147 million	1.9%
100+ years	0.6 million	0.01%

While that percentage may seem small, that particular demographic accounted for merely 0.05% of the population in 1950, meaning our world has a notably higher percentage of older people than it did 70 years ago.

Why is this significant? An aging population typically means a declining workforce and an increase of people looking to cash in their pensions. This can put pressure on the working class if taxes are raised.

Of course, an aging population can have positive impacts on society as well. For instance, elderly citizens tend to volunteer more than other age groups. And research has shown that older communities have lower crime rates. By 2050, the crime rate in Australia expected to drop by 16% as the country’s population gets older.

To mitigate some of the risks associated with a rapidly aging population, certain countries are working towards more sustainable pension systems, to support aging citizens while taking the stress off the working population.

» Like this? Then you might like this article on The World’s Youngest and Oldest Countries

Where does this data come from?

Source: United Nations World Population Prospects 2019 (accessed Feb 12, 2021)

Datastream

Euro 2020: Qualified Nations and Past Winners

After a year-long delay, the 2020 UEFA European Championship is back with new rules, reduced spectators, and fierce competition.

Published

2 weeks ago

June 11, 2021

Niccolo Conte

The Briefing

The 2020 UEFA European Football Championship will kick off Friday, June 11th 2021 after a year-long delay due to COVID-19
The tournament will take place across 11 host cities and feature new rules, reduced spectators, and fierce competition

The 2020 European Championship Returns with New Rules

After a year-long delay, the 2020 UEFA European Championship is set to kick off what will be the largest international sports tournament to take place since the pandemic.

While the final stage of the tournament typically takes place in one or two nations, this year’s will be played across 11 different countries.

Running from June 11th to July 11th 2021, the opening game between Italy and Turkey will kick off at the Stadio Olimpico in Rome, and the final will take place at London’s Wembley Stadium.

COVID-19’s Impact on Teams and Spectators

Aside from the initial year-long delay, COVID-19 has changed how teams and spectators will participate in the tournament.

Squads have been expanded from 23 to 26 players, and coaches will be permitted to call up more players if COVID-19 infections force players into isolation.

For spectators, individual stadiums within host cities have announced varying capacities ranging from 20-100%, with strict stadium entry requirements across the board. Since these capacities are pre-tournament estimates, we’ll have to wait until matchday to see how many ticket-holders are comfortable attending the fixtures in person.

Host Stadium and City	Spectator Capacity
Johann Cruijff ArenA, Amsterdam	25-45%
Baku Olympic Stadium, Baku	50%
Arena Națională, Bucharest	25-45%
Puskás Aréna, Budapest	Aiming for 100%
Parken Stadium, Copenhagen	25-45%
Hampden Park, Glasgow	25-45%
Wembley Stadium, London	Minimum of 25%
Football Arena Munich (Allianz Arena), Munich	Minimum of 14,500 spectators (~22%)
Stadio Olimpico, Rome	25-45%
Estadio La Cartuja, Seville	25-45%
Krestovsky Stadium (Gazprom Arena), Saint Petersburg	50%

Source: UEFA

Strong Competition Among Euro 2020’s Favorites

Despite current world champions France remaining as undeniable favorites, bookies are putting England to win the tournament (despite a fairly young squad) partially due to the home field advantage in the semi-finals and final.

Spain, Germany, and Italy remain formidable competitors, and Belgium’s golden generation will have one final shot at silverware after their third place finish at the 2018 FIFA World Cup.

European champions Portugal are another obvious threat, as Cristiano Ronaldo will be looking to become the tournament’s top goalscorer of all time (currently tied with Michel Platini at 9 goals).

While the 2020 edition of UEFA’s European Championship features a variety of on-field and off-the-field changes, the trophy truly feels up for grabs and is a welcome return to international football for fans around the world.

»Like this? Then you might enjoy this article, The Top 10 Football Clubs by Market Value

Where does this data come from?

Source: UEFA