Bank Closures Due to Pandemic Create Banking Deserts : The Indicator from Planet Money The Covid-19 pandemic has accelerated the decline of in-person banking. But after a bank branch finally closes down, what happens to the community left behind?

After The Banks Leave

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I'm Sally Herships, in for Stacey Vanek Smith. And I'm here today with NPR economics reporter Scott Horsley.

SCOTT HORSLEY, BYLINE: Good to be with you, Sally.

HERSHIPS: Scott, you stumbled on today's story in your own backyard.

HORSLEY: Or at least close to my backyard, in my neighborhood. There's a bank that I walk past every night when I take my dogs out, or there used to be a bank. Not long ago, I was walking by, and I noticed that the ATM was gone. The door was locked. The sign had disappeared. The bank had just suddenly closed. And it's one of those classic old-fashioned bank lobbies with lots of granite and a great big vault. It just screamed security and permanence. It turns out, though, for a bank company, that grand physical branch was kind of an albatross.

HERSHIPS: Bank consultant Steven Reiter told us most of the routine transactions that happen inside a physical bank - like cashing checks, making change, taking deposits - those aren't moneymakers for a bank. They are costs. And banks are looking for ways to cut costs.

HORSLEY: They've been cutting costs for decades using ATMs. And more recently, they've tried to get customers to bank online or with their smartphones. Reiter, who consults on where to open and where to close bank branches, says over the last five years, foot traffic in banks has declined by about 35%.

STEVEN REITER: And some banks, that's as much as 50%.

HERSHIPS: And with a pandemic, that shift to online and smartphone banking just accelerated. And so did the number of bank branch closings. Banks closed a total of 3,324 banks last year. And that's our INDICATOR for today. It comes from a tally by S&P Global Intelligence. And S&P says the branch closings have continued in the early months of this year.

HORSLEY: Now, that's only about 4% of all the banks out there, so there are still a lot of banks. But Reiter says something is lost when a bank branch disappears, especially if it's the only branch in a neighborhood or a small town.

REITER: You can look at a rural small town downtown or an urban neighborhood that maybe has seen better days, but as long as there's still a bank branch, the other retailers will hang on. Once you lose that, that's often the last thing standing between viability, survivorship and complete decay.

HERSHIPS: Today on the show, the ripple effects for a community when the last local bank closes its doors for good.


HORSLEY: Banks shuttered more than 3,300 branches last year. For some customers, like me, the loss of a bank is a minor inconvenience. I mean, maybe I can't walk to the bank in my neighborhood anymore, but OK, I drive past another branch on my way to the grocery store. And I still have a bank app on my smartphone 24 hours a day.

HERSHIPS: But, like me, not everyone has a car or a computer or the know-how to adjust when their family bank branch closes its doors. That's something Steven Jackson has been wrestling with in Shreveport, La., where he's a county commissioner - or parish commissioner, as they say in Louisiana.

STEVEN JACKSON: What really got my attention was a family who lives in Cedar Grove - and Cedar Grove is an inner city, mostly African American neighborhood.

HORSLEY: Steven heard from one member of this family who goes to his church. She's an older woman, and she'd been going to the same bank branch for decades, even as the sign outside changed repeatedly from one corporate owner to another. And then one day, she got a notice saying, come clean out your safe deposit box. That's how she learned her bank was about to close.

JACKSON: Her closest bank - now, she has to depend on a taxi or somebody to pick her up and take her where she's going. But now, she has to have them pick her up and take her completely outside of the neighborhood to go and get her banking done.

HERSHIPS: For some customers, that might just be the push they need to switch to online banking. But Steven knows better than to suggest that to his elderly constituent.

JACKSON: She's of the age where she's not just going - you can't just tell her, pick up the iPhone and do mobile banking (laughter). She's not going to do it (laughter).

HORSLEY: As he watched the banks close in some parts of his hometown, though, Steven noticed new branches were opening in other parts of town, often in the suburbs. He worried about the signal that sends to residents, to local businesses, even to kids bicycling past a now-vacant bank building.

JACKSON: Somebody's driving to work, and they realize, OK, well, the same bank that closed in my neighborhood is open on this sort of nice and greener and prettier side of town, but they closed mine down. And it makes individuals wonder and in the minds of young boys and girls, is my neighborhood of the same value.

HERSHIPS: Steven is worried that as banks in the neighborhood he represents close, some people might turn to more expensive alternatives, like check-cashing stores and payday lenders. He also says the lack of convenient banking services is not just a problem in the inner city.

JACKSON: What about the digital divide for individuals who are in the rural areas, who don't have as good of cell reception or Internet reception?

HORSLEY: It turns out, people who live in rural areas are especially likely to do their banking in person. An FDIC survey found more than 40% of rural residents visited their bank at least 10 times in the year before the pandemic. One bank executive told me visiting the bank is a social occasion for his customers, especially on payday. Now, that might be less important in a big city where you have more opportunities to bump into your neighbors.

HERSHIPS: But no matter where you live, a physical bank branch also serves some important practical functions that aren't easily replaced by a smartphone. A place for local merchants to deposit cash or get change or apply for a business loan. Steven says when those services dry up, a neighborhood runs the risk of becoming a bank desert.

JACKSON: Just like a food desert where you have to drive or walk maybe a five-mile radius to get to fresh food, fresh produce, a bank desert is a place where you have to go beyond the five-mile, six-mile territory of your neighborhood. And of course, we're not asking for a bank on every corner, but a lot of people are used to having quick access, being able to get in, get out, knowing their banker. That also translates to mortgages and loans and the businesses in that area. Can they get access to capital?

HORSLEY: Not every branch closing has to result in a bank desert, though. Steven's excited about some of the alternatives that have sprung up in Shreveport - sort of banking oases. For example, when Capital One decided to close its branch at Southern University in the city's MLK neighborhood, Steven says the bank worked with a nonprofit credit union to step in and fill the void.

JACKSON: They're a credit union. Their mission is to be in the community. And so we're not saying the national banks have to be here.

HERSHIPS: But it's important, Steven says, to find those alternatives. He points to another Shreveport experiment where a coalition of churches teamed up with a credit union to offer low-interest loans and a discount ATM.

JACKSON: A lot of the African American churches, they have a traffic flow on Wednesdays and Sundays. Why not have an ATM? There are models out there, we just have to be willing to sit down and think about how can we make it work so that we don't end up with bank deserts.

HORSLEY: The challenge is making sure everyone has access to convenient, affordable financial services even if they don't come with marble walls and a steel bank vault.

HERSHIPS: Scott Horsley, thank you so much.

HORSLEY: It's great to be with you.


HERSHIPS: I'm Sally Herships, in for Stacey Vanek Smith. This episode of the INDICATOR was produced by Brittany Cronin with help from Gilly Moon. It was edited by Alex Goldmark and fact-checked by Sam Cai. The INDICATOR is a production of NPR.


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