The study, provocatively titled "The Death of Banks," analyzes the current trends and factors around the decline of banks, an issue that has garnered increasing attention over the past few years.
Key insights noted by the study include a 6.5% decline in bank branches since 2012: This trend would see total number of physical banks nationwide fall to fewer than 16,000 by 2030 and all branches closing by 2034.
The study was conducted by N26, a German neobank headquartered in Berlin, and Eric Taylor, a director of UX research at Varo Bank, a mobile-only neobank.
A neobank is another term for an online or internet-only bank. While the study may be seen as a self-promotion, the trend has garnered attention from traditional institutions.
The New York Fed published a paper as far back as 1995, noting that “the traditional business of banks ... has declined.”
The NY Fed paper raised concerns that traditional banks may end up taking on riskier loans or non-traditional activities to remain profitable in the subsequent years, perhaps a premonition of the financial crisis that arose just over a decade later.
A Federal Reserve report published in 2020 found similar trends as the Varo/N26 report.
Three of the five largest banks in the U.S. closed branch locations at a rate of greater than 7% over the period between 2014 and 2018, Smart Asset reported.
The Varo/N26 report found that 86.9% of American banking consumers use online services, with slightly more – just under 89% - of millennials preferring digital services.
The greater access and easier payment services offered by online banks were cited as the top reasons that consumers turn to online banking.
Over half of those same consumers said they believe online-only banking will outnumber physical branches in the next two decades.
However, the most significant factor that may sustain the closure of bank branches is the mainstream emergence of cryptocurrency. Easier access and confidence in cryptocurrencies will force banks to adapt and include them, or face further closures.
"We believe we have the model of the future: a light branch footprint, seamless digital capabilities and a network of partners that expand our reach to hundreds of millions of customers," Jane Fraser, president and CEO at Citigroup, has said.
Bank of America chairman and CEO Brian Moynihan has also noted that major technology developments in recent years – including machine learning and artificial intelligence – will have impact on the industry in years to come.