Poof! Branch Transactions Drop By Half in 20 Years

Average cost per transaction doubles, even though branch volumes have been cut nearly in half. This is why critics say branches are dying — the math doesn’t pencil out like it once did.

Branches today process roughly half the number of transactions they did just 20 years ago. According to an industry study on branch transactions, volumes have declined 45.3% since 1992, while the average cost per transaction has more than doubled from 48¢ to $1.08.

The findings are based on a compilation of transaction and labor cost statistics assembled from proprietary data collected over two decades.

FMSI, the company that authored the study, is uniquely qualified to offer their insight on branches. They provide branch lobby tracking and management solutions to financial institutions across the U.S., allowing them to count branch visitors and transactions for every branch in their client network — and they do this every 15 minutes, all day long. In total, FMSI says they look at more than 17 million monthly transactions.

“We are the only ones in the industry that have access to this type of aggregate information,” W. Michael Scott, President/CEO of FMSI, points out proudly.

With their front row perspective on branch utilization trends, they’ve witnessed a 17.9% decline in branch productivity since 1992. Transactions-per-teller-hour have dropped from roughly 20 in 2003 to barely 15 in 2013. Salary and benefits paid to tellers ballooned 84.2% over the last 20 years, translating to a 123.6% increase in labor cost per transaction.

( Read More: Branch Boom Gone Bust: Forecast Calls For Steep Decline )


( More: Small Businesses Prefer Traditional Banking, Still Rely Heavily on Branches )

The hourly rate for tellers in 1992 was $8.85. Back then it only cost 48¢ for a teller to perform the average transaction. Skip ahead to 2013, it costs an average of $16.30 per hour to cover a teller’s salary and benefits, and average transaction cost has shot up over $1.

Does this mean it’s time to write the eulogy for branches? Probably not. While their role as “transaction factories” will undoubtedly remain on a steep and steady decline, they will likely continue to be important nodes for advisory services, high-value products and other face-to-face interactions.


( Read More: The State of Branches in The Age of Automated Banking )

Time to Close Branches and Cut Tellers

During boom times, banks and credit unions didn’t worry about staffing branches at optimal levels because branch activities were always growing — more branches, more tellers.

“Management was convinced there wasn’t a lot of money to be saved in closely managing teller staffing,” Scott explains. “They were looking where to add new branches as new housing developments popped up on every corner.”
In a sense, the housing bubble that Scott alludes to helped fuel another bubble in branch building — more homes meant more branches with more tellers.

FMSI says many financial institutions have chosen to ignore trends suggesting the market is now over-branched. According to FMSI, the landscape has changed markedly from banking’s glory days, and it could very well be time to start closing low volume branches.

( Read More: The Branch Paradox: Consumers Say One Thing, Do Another )

“Sometimes it can appear that banks are working for their tellers, not the other way around.”
— JR Pimentel, VP/HR
Bristol County Savings Bank

The company stresses the importance of “branch workforce optimization,” consultant speak for “getting the most out of the fewest people possible.”

FMSI says the key is to identify predictable lulls in branch activity.

“By paying closer attention to teller idle time, or the time tellers are waiting for transactions, an institution can get more accomplished,” Scott explains.

What might tellers shift their attention to when not handling transactions? FMSI says proactive outbound selling campaigns are one idea.

According to research from Celent, only about 3% of banks address the issue of teller management — a statistic Scott finds “alarming” given the bottom line pressures financial institutions face today.

“Reducing operating expenses through consolidating your low volume branches, coupled with a systematic workforce optimization program, can better position your institution to face the increasing challenges the 21st century has to offer,” Scott concludes.

You can download the complete 19-page “FMSI Teller Line Study” here as a PDF for free (requires completion of a short form).

This article was originally published on May 28, 2013. All content © 2018 by The Financial Brand and may not be reproduced by any means without permission.


  1. I’ve been saying that this shift in branch visitation and transactional activity is only going to get worse with smartphone adoption and that that will unavoidably result in branch closures, but people seem to think that customers still “love coming into branches” or that the decline in transactional activity won’t effect revenue. Both are examples of burying your head in the sand.

    The only way this ends is with a 30-40% reduction in branch numbers by early next decade. If you look at the FMSI report, one of the most telling statistics is actually the per capita branch numbers which have dramatically increased in the last two decades – that number is absolutely unsustainable as customer behavior changes.

    It’s started and it’s going to fundamentally change the nature of this business…


  2. I can’t say I’ve seen any research suggesting consumers “love coming into branches.” I’ve seen research showing that consumers think they need branches for certain interactions and some transactions, but I think that’s their perception that branches are either (A) more convenient/efficient, and/or (B) more safe/secure than other channels. I don’t think very many consumers “love” branch banking — that’s a bit of an exaggeration, just like saying “branches are dead” just because transaction volumes have declined.

  3. Retail Banking is not dying, but it is changing.

    Smaller offices, Universal Bankers, No vaults, Automation via Currency Recyclers, and design based on client experience versus banker convenience.

    Once banks find out the real truth about office closures – Attriton less than 2% and Significant financial gains, there will be a rush to close offices. Hint, watch for increased regulatory scrutiny.

  4. Agree. Branches aren’t dead – just mostly dead 🙂

    Apologies to Monty Python…

  5. Rauly, it sounds like you are alluding to increased regulatory scrutiny specifically related to branch closures, presumably those currently left open to meet CRA requirements, correct?

    Face-to-face interactions for some financial products and services feels like an inescapable reality for many consumers in the immediate future. That said, there are still some other ideas to supplant costly branches without sacrificing personal interaction. A small Texas credit union just rolled out a banking delivery service. And others have suggested that customers could schedule appointments (by phone, online, app) to meet with a financial representative somewhere like Starbucks. Just because some consumers may insist on face-to-face interaction doesn’t mean you have to own the $5 million building where the meetings occur.

    What would be really funny is if some cheeky financial institution decided to hold its private client meetings in the “community conference space” that so many banks and credit unions incorporate into their floor plans today — ha!

  6. We saw the same transactional behavior with call centers starting in the late ’80s with the advent of Auto Attendants and IVR technology. Fewer customers want live assistance in call centers for routine transactions, but the ones who do call have needs that are more complex and CSRs must perform a more complicated role than in the past.

    Banks must learn that lesson that while branches may not disappear altogether, the role of the branch employee is changing at a faster pace. Branch employees must be better trained in all facets of problem solving and product knowledge or else customers will simply go elsewhere. Routine transactions like check cashing and giving out balances have become a thing of the past.

  7. Recently there were 35.4 commercial banks per 100,000 people in the US. The world average is about 13. There are 3 branch libraries per 100,000 people, and who knows how many travel agencies. “Bank branches’ are the “travel agencies” or “libraries” of this decade. In our current transparent information age, who would build a brick & mortar building for one of them today?

    Banks will be fewer, larger, more high end, product-specific, reference business destinations. In the future. Just like libraries and travel agencies, we will need only about 1 for every 10,000-25,000+ people, each of whom will need a unique, in-person (and value-added) experience. That’s roughly 1/3 to 1/10 the current number of bank branches.

  8. Tim Ryan says:

    Dramatic sounding statistics, but folks may want to keep in mind a few points:

    1. The salary and benefit costs are not presented in constant dollars. Yes, 84% increase sounds like a lot, but cumulative inflation over the same time period was 66%, and everyone knows that health insurance costs have grown much faster than inflation for decades. Under the circumstances, it might be a stretch to describe branch salary costs as having “ballooned.”

    2. The decline in transaction volume is per branch, not total. There are fewer transactions per branch in part because there are more branches. The FMSI study references the decline in households per branch over this same period, as branch growth far exceeded household growth. Transactions per branch would, therefore, decline significantly even if transactions per household—and in total—stayed the same. While transaction behavior has in fact changed, the 48% figure quoted is a combination of both factors and it would be wrong to interpret this a reasonable estimate of total transaction decline.

    3. The notion that the decline in branch transactions will lead to massive branch closures is widespread, yet curious. Branch presence still plays a huge role in customer acquisition; even ardent branch critics accept this. So, with declining transaction volumes leading to lower staff headcount, this vital tool for revenue generation will now cost less to operate. How is it that bankers will want fewer revenue generators when they cost less? To the contrary, as the operating cost per branch drops, it is likely that your competitors will find it that much easier to open branches in “your” market to compete for “your” customers—especially if you take the advice of those who would have you lop off “30-40% of your existing network.

  9. Great points Tim. Thanks for your comment. Your insights are always welcome.

  10. Jim Norris says:

    I believe it will only take a few years to see branch transactions to drop by half again. Our branch transactions dropped by 18% in just one year due to our focus on mobile banking, debit cards and credit cards. We are getting our staff out to get in front of members because they are not coming in. We are also retooling our operation to have mobile staff who can do transactions anywhere. FIs must act now or they will be left in the dust!

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