Bank branches are closing, and they’re leaving the most disadvantaged areas behind

In the US and UK, disadvantaged areas have fewer bank branches, and are losing them at a higher rate. (Justin Tallis/AFP via Getty Images)

The coronavirus pandemic has led to significant changes in how people approach banking.

A recent survey found that four out of five Americans (78%) were concerned about going to their local bank or grocery store. More than half of respondents (55%) said they would visit bank branches less often, and another quarter (26%) said they would avoid face-to-face banking altogether.

But even before the Covid-19 outbreak, banking was increasingly shifting to virtual spaces and away from physical ones. In the UK, the number of bank and building society branches has fallen by 22% from 2012 to 2019, according to a House of Commons Library report. The same thing has been happening in most developed countries.

Northern European and Baltic countries have registered some of the biggest drops in the number of bank branches per 100,000 adults in the past few years. The US and Australia, on the other hand, have slightly more modest declines.

Banks are closing their branches in order to save money while more and more customers are using online banking services.

Where are bank branches being closed?

A CityMetric analysis of figures from the Federal Deposit Insurance Corporation (FDIC), a US government agency that insures deposits from commercial and savings banks, reveals that the country’s most disadvantaged areas have less than half as many branches as the most well-off areas. There are now 4,854 bank branches in the 10% most disadvantaged areas across the US, compared to 11,042 branches in the most well-off 10% of areas.

In the chart below, the 10% most disadvantaged neighbourhoods in America are represented by the first bar, while the 10% most privileged are represented by the tenth bar.

The most underserved neighbourhoods already have fewer banks, and they're losing them at a faster rate while gaining far fewer new branches. 

Between the beginning of 2014 and the middle of June 2020, almost 17,500 bank branches were closed in the US and fewer than 7,000 were opened, according to an analysis of figures from FDIC and S&P Global. (Figures released by the FDIC and S&P Global have some differences, but they are minor and should not radically affect the results of the analysis. The locations of bank branches in the FDIC data have been determined as the centre of the ZIP Code they’re in.)

The most well-off American neighbourhoods now have just 7% fewer bank branches than they did at the beginning of 2014, compared to declines between 11 and 13% in all other neighbourhoods.

Things look similar in the UK. According to Which?, a British consumer issues resource, 3,292 bank branches closed in the UK from January 2015 to August 2019, with the North West of England, the South East of England, and Scotland bearing the brunt of the change.

CityMetric analysis reveals that in the UK, just like in the US, disadvantaged areas have been hit particularly hard.

Just 42 bank branches were closed in the 10% most well-off neighbourhoods in cities and major towns in England and Wales. The worst-off 10% of areas, on the other hand, saw more than three times as many banks disappear in the same time period.

A note on "disadvantage"

It is worth noting here that there is no formal definition of disadvantaged areas in the US. 

In England and Wales, disadvantaged areas are those with the lowest scores in government-released indices of deprivation. These indices take several metrics into account: not just income, but also data around employment, education, health, crime, barriers to housing and services, and the local living environment.

While an official equivalent doesn’t exist in the US, a group of researchers proposed the creation of a similar index based on available census data. We have used that in our analysis above.

Who will go underserved?

While officials and bank executives have claimed that the vast majority of bank users will not be seriously affected by bank closures, some people rely on brick-and-mortar banking.

Branches are important for small businesses, many of which may operate with a lot of cash. A report from “Move Your Money” found that UK areas that lose their last bank branch register a 104% drop in small business lending growth.

Bank closures also affect the elderly and disabled people, many of whom are still unable or unwilling to use digital banking services.

Analysis by S&P Global also revealed that banks are closing at a higher rate in majority-Black neighbourhoods in the US. From 2010 to 2018, the number of bank branches in majority-Black areas shrank by 14.6%, compared to the 9.7% average in all other areas.

Income was not an indicator of why Black communities are losing more banks – wealthier Black areas were just as likely to see bank closures as poorer ones.

How can bank closures be mitigated?

The gradual vanishing of brick-and-mortar banking is likely to be accelerated by the coronavirus crisis.

According to Fidelity National Information Services (FIS), which works with 50 of the world’s largest banks, there was a 200% jump in new mobile banking registrations in early April.

But there are still a number of ways that banks can serve as many customers as possible.

Some banks are helping older customers transition to digital banking by offering them extended support online, over the phone or video calls. This is meant to emulate the customer support experience of bank branches remotely.

Bank services can also be consolidated to make up for reduced foot traffic. In the UK, post offices give people access to the vast majority of banking services, although post offices are threatened by closures as well.

Some banks are also setting up temporary or mobile banking units. British banks have even launched “Business Banking Hubs”, joint branches that target small business customers. A similar approach could be used to launch joint bank branches for people in underserved neighbourhoods.

There is no question that banks still need to exist. One survey found that some 75% of Americans still visit a physical bank branch at least once a month.

For a lot of bank users, brick and mortar is not only preferable, it is necessary. And while city centres won’t see their banks go away anytime soon, those living in poorer parts of town may need access to banking even more.

Nicu Calcea is a data reporter at New Statesman Media Group.


To see how a city embraces remote work, just look to Helsinki

A deeply rooted culture of trust is crucial to the success of remote work. (Sean Gallup/Getty Images)

When I speak to Anssi Salminen, an account manager who lives an hour outside Helsinki, he’s working from a wooden platform on the edge of a Finnish lake. With a blanket laid out and his laptop set up, the sun low in the sky, Anssi’s remote work arrangement seems blissful. 

“I spend around half of my time working somewhere else other than the office,” he says. “I can work from home, or on the go, and I also travel to the Netherlands once a month and work from there.

“The emphasis in my work has always been that it doesn’t matter when or where I work, as long as I get things done.”

For many people around the world, the shift to remote work was sudden, sparked by the coronavirus pandemic. Finland, however, is finding the transition much less significant. Before Covid-19, the Nordic nation already displayed impressive levels of remote working, with 14.1% of its workforce reporting usually working from home. Only the Netherlands has a comparable percentage of remote workers, while the UK lagged behind at 4.7%, and the US’s remote workforce lingered at around 3.6%

Anssi works for one of many Helsinki-based companies that offers its employees flexible policies around when and where they work. That arrangement is in part due to the Finnish capital’s thriving start-up scene. In spite of being a relatively small city by global standards it is home to over 500 technology start-ups. These companies are leading the way when it comes to keeping employees connected wherever they choose to work.

“Our company has a completely location-free working policy,” says Kasper Pöyry, the CEO of Helsinki-headquartered software company Gapps. “All meetings are made available for online participants and facilitated accordingly. Some employees have worked extensively from abroad on a working holiday, whilst others prefer the comfort and social aspects of the well-stocked office. Whatever works for our employees is what works for the company.”

Like Gapps, many Helsinki-based firms are deeply preoccupied with providing the necessary technology to attract talent in a vast and sparsely populated country. Finland has only 15 inhabitants per square kilometre, and companies understand that in order to compose teams of specialised expertise, they may have to seek talent outside of the city. Local governments take a similarly proactive stance toward technological access, and Helsinki offers free, unrestricted, high-speed Wi-Fi from city-wide hotspots, while the country as a whole boasts some of the best coverage in Europe. 

But encouraging remote work isn’t just about optimising the potential of Finland’s workforce – companies in Helsinki also recognise that flexibility has clear benefits for both staff and employees. 

“The idea of a good work-life balance is ingrained in Finnish culture,” says Johannes Anttila, a consultant at organisational think tank Demos Helsinki. “It goes back to our rich history of social dialogue between labour unions and employers, but also to an interest in delineating the rules of working life and pushing towards people being able to enjoy their private life. Helsinki has been named the best city in the world for work-life balance, and I think that this underlies a lot of the mentality around remote work.” 

For Peter Seenan, the extent to which Helsinki residents value their free time and prioritise a work-life balance prompted his move to the city ten years ago. He now works for Finnair, and points to Finland’s summer cottages as an example of how important taking time to switch off is for people in the country. These rural residences, where city residents regularly uproot to enjoy the Nordic countryside, are so embedded in Finnish life that the country boasts around 1.8 million of them for its 5.5 million residents

“Flexible and remote work are very important to me because it means that I don’t feel like I’m getting stuck in a routine that I can’t control easily,” he says. “When I’m working outside of the office I’ll go down to my local sauna and go ice swimming during the working day, typically at lunchtime or mid-morning, and I’ll feel rejuvenated afterwards… In winter time especially, flexibility is important because it makes it easier to go outside during daylight hours. It’s certainly beneficial for my physical and mental health, and as a result my productivity improves.”

The relaxed attitude to working location seems to pay off – Finland is regularly named the happiest country in the world, scoring highly on measures such as how often its residents exercise and how much leisure time they enjoy. With large swathes of unspoiled countryside and a national obsession with the outdoors, sustainability is at the forefront of its inhabitants’ minds, leading to high levels of support for measures to limit commuting. In January, Finland passed a new Working Hours Act, the goal of which was to help better coordinate employee’s work and leisure time. Central to this is cementing in law that employees can independently decide how, when, and where they work.

Yet enacting the new ruling is not as simple as just sending employees home with their laptops. For Kirsimarja Blomqvist, a professor of knowledge management at LUT University, perhaps the most fundamental feature that remote work relies upon is a deeply rooted culture of trust, which Helsinki’s residents speak of with pride. The anecdotal evidence is backed up by data which suggests that Finland boasts one of the highest levels of trust and social cohesion in Europe, and equality and transparency have always been key cornerstones of political thought in the country.

“Trust is part of a national culture in Finland – it’s important and people value it highly,” she explains. “There’s good job independence, and people are valued in terms of what they do, not how many hours they work for. Organisations tend to be non-hierarchical, and there is a rich history of cooperation between trade unions, employers, and employees to set up innovative working practices and make workers feel trusted and valued. 

“It’s now important that we ensure that this trust can continue to be built over technology, when workers might have been more used to building it face-to-face.”

As companies begin to look hopefully toward a post-Covid future, the complexities of remote work are apparent. Yet amid issues of privacy, presenteeism, and social isolation, the Helsinki model demonstrates the potential benefits of a distanced working world. The adjustment to remote work, if continued after the crisis, offers a chance to improve companies’ geographical diversity and for employers to demonstrate trust in their workforce. On these issues, Blomqvist believes other cities and employers can learn a lot from Helsinki.

“People are now beginning to return to their workplaces, but even as they do they are starting to consider the crisis as a jumping point to an even more remote future,” she says. “The coronavirus pandemic has been an eye-opener, and people are now interested in learning from Finland’s good practices… We are able to see the opportunity, and the rapid transition to remote work will allow other countries to do the same.”

Katie Bishop is a freelance writer based in Oxford.