Bank branches were once the primary point of contact between people and the financial system, and their decline has been rapid and consequential.
What the branch was for
Cash handling, since cash was the dominant payment method.
Account opening and identity verification, which required documents and a person to check them.
Lending decisions, made locally by managers who knew the customers.
And a physical presence establishing that the institution was real and had somewhere you could go.
The technologies that removed the need
The cash machine removed the routine withdrawal, which was the most frequent reason for visiting.
Telephone banking removed balance enquiries and transfers.
Card payment reduced cash use, which reduced both withdrawal and deposit.
Online and then mobile banking removed almost everything else.
Which means each technology removed a category of visit, and the cumulative effect was that footfall collapsed.
Centralised credit decisions
Lending moved from local judgement to statistical scoring.
Which produced consistency and removed some sources of discrimination, and it removed the local knowledge that manager relationships had provided.
Small business lending in particular has been argued to have suffered from the loss of local assessment, since it depends on information that is difficult to capture in a scoring model.
The closure programmes
Branch numbers have fallen substantially across most developed countries over recent decades.
Which follows the economics — a branch has substantial fixed costs and serves declining transaction volumes.
Closures have concentrated in areas where they matter most, since low-volume branches tend to be in less densely populated and less affluent areas.
Who is affected
Older customers, people without internet access or confidence, people with disabilities affecting digital use, and small businesses handling cash.
Which is a documented set of groups, and surveys consistently find substantial proportions who prefer or require in-person banking.
Cash-dependent businesses face specific difficulty depositing takings when the nearest branch is distant.
The responses
Shared banking hubs, where multiple institutions provide services from one location.
Post office banking arrangements, using an existing network.
Mobile branches serving rural areas on a schedule.
And regulatory requirements to assess impact before closure and to provide alternatives, introduced in several jurisdictions.
Cash access
Separate from banking generally and increasingly regulated.
Which follows evidence that cash acceptance and access were declining faster than the population was adapting.
Legislation requiring reasonable access to cash has been introduced in several countries, and the definition of reasonable is where the argument sits.
The digital-only entrants
Banks operating without branches entirely, generally with lower cost bases.
Which has produced genuine competition on service and on price, and it has concentrated on customers who are comfortable digitally.
Their growth has accelerated the decline of the branch model by removing the assumption that a bank requires a network.
Fraud and the human check
Branch staff have intervened in fraud cases where a customer was being coached to transfer money.
Which is a documented benefit of in-person interaction that digital channels replicate imperfectly.
Banks have introduced warnings and delays in digital channels to address this, with mixed effectiveness.
Financial advice
Access to advice has narrowed as branches closed and as regulation raised the cost of providing it.
Which has produced an advice gap, where people with modest sums cannot economically access regulated advice.
Guidance services and automated advice have been developed to address it.
Community consequences
Branch closure removes footfall from high streets, affecting other businesses.
Which has been documented and is one reason closures attract local political attention beyond the banking question.
What the evidence suggests
Digital channels serve most people well and leave identifiable groups underserved.
Which means the policy question is how to provide for those groups rather than whether the transition should occur.
Post offices
Have taken on banking services in several countries as branches closed.
Which uses an existing network and provides basic transactions without full banking services.
The arrangement depends on the post office network itself remaining, which is under its own pressure.
Small business banking
Cash-handling businesses face specific difficulty when branches close, since depositing takings requires travel.
Which has produced arrangements including cash collection services and deposit facilities at other locations.
The regulatory position
Requirements to assess impact before closure and to identify alternatives have been introduced in several jurisdictions.
Which slows closures without preventing them, and the assessments are published.
Digital exclusion
Substantial proportions of the population in most countries lack the access, skills or confidence for digital-only services.
Which correlates with age, income and disability, and it overlaps heavily with the groups most dependent on branches.
Support programmes exist and reach a fraction of those affected.
What replaced the relationship
Algorithmic assessment, remote contact centres and self-service replaced the local manager relationship.
Which is more consistent and cheaper, and it removed a source of judgement that handled unusual cases.
The trade-off is real and is rarely stated explicitly.