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.
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|
|Bank of America||4,265||116%||-75%|
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.
Chart: 30 Years of Wildfires in America
Here’s a look at the number of wildfires in America that have occurred each year since 1990, and the acres of forest land scorched during that period.
30 Years of Wildfires in America
This summer, record-breaking droughts and relentless heat waves have fueled disastrous wildfires across the United States. It’s gotten so bad, the state of California has decided to shut down all national parks for two weeks to stop the spread.
But how disastrous has this year been compared to previous years? This graphic gives a historical look at the number of wildfires in America that have occurred each year since 1990, and the acres of forest land scorched during that period.
Total Wildland Fires and Acres from 1990 to 2020
In the U.S., an average of 70,000 wildfires burn through 5.8 million acres of land each year. But some years have been worse than others.
|Year||# of Fires||# of Acres Burned|
*note: 2021 figures as of September 3, 2021
One particularly bad year was 2006, which had over 96,000 fires and destroyed 9.9 million acres of land across the country. It was the year of the Esperanza Fire in California, which burned 40,000 acres and cost $9 million in damages.
2015 was also a devastating year, with over 10.1 million acres destroyed across the country–the worst year on record, in terms of acres burned.
Climate Change’s Role in Wildfires
Wildfires are only expected to worsen in the near future since warmer temperatures and drier climates allow the fires to grow quickly and intensely.
We’re already starting to see climate change impact the wildfire season. For instance, autumn is usually peak wildfire season for California, but this year, one of the largest fires on record started in mid-July, and is still burning as of the date of publication.
Visualizing the Typical Atlantic Hurricane Season
While the Atlantic hurricane season runs from June to late November, about 85% of activity happens between August, September, and October.
Explained: The Typical Atlantic Hurricane Season
On August 29, 2021, Hurricane Ida hurled into the state of Louisiana at rapid speed. With winds of 150 mph, preliminary reports believe it’s the fifth strongest hurricane to ever hit the U.S. mainland.
As research shows, Hurricane Ida’s impact hit right at the peak of the Atlantic hurricane season. Here’s a brief explainer on the basics of hurricanes, how storms are classified, and what a typical storm season looks like in the Atlantic Basin.
Let’s dive in.
Classifying a Storm
Hurricanes are intense tropical storms that are classified by their wind speed. What’s the difference between a hurricane, a typhoon, and a cyclone? They’re essentially the same thing, but are named differently based on their location:
- Hurricane is used for storms that formed in the North Atlantic, central North Pacific, and eastern North Pacific (impacting countries like the U.S.)
- Typhoon is used for storms in the Northwest Pacific (impacting countries like Japan)
- Tropical Cyclone is used for storms in the South Pacific and Indian Ocean (impacting countries like Fiji and India)
Since we’re focusing on the Atlantic, we’ll be using the term hurricane and/or storm throughout the rest of this article.
A storm needs to reach a certain wind speed before it gets classified as a hurricane. Storms with wind speeds of:
- <73 mph are considered Tropical Storms
- 74-110 mph winds are considered Hurricanes
- 111 mph+ winds are considered Major Hurricanes
Breaking Down the Atlantic Hurricane Season
Generally, Hurricanes form in the warm ocean waters in the central Atlantic and Gulf of Mexico, following westward trade winds and curving up towards the North American mainland. Hurricanes are formed when these specific elements come into play:
- A pre-existing weather disturbance such as a tropical wave
- Water at least 80ºF (27ºC) with a depth of at least 50 meters
- Thunderstorm activity
- Low wind shear (too much wind can remove the heat and moisture hurricanes use for fuel)
The Atlantic hurricane season technically lasts six months, beginning on June 1st and ending in late November. However, 85% of activity happens between August, September, and October.
Each subregion in the Atlantic has its own unique climatology, which means peak seasons can vary from place to place—for example, south Florida sees the most hurricanes in October, while the entire Atlantic Basin’s peak season is early-to-mid September.
Climate Change and Hurricanes
According to the Center of Climate Change and Energy Solutions, it’s unclear whether climate change will increase the number of hurricanes per year.
However, research indicates that warmer weather and high ocean temperatures will most likely lead to more intense storms, ultimately causing more damage and devastation.
» Want to learn more about climate change? Here’s an article on The Paris Agreement: Is The World’s Climate Action Plan on Track?
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