Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche

The Death Spiral

Banking Apocalypse Thousands of Brick and Mortar Branches Closing

The brick and mortar bank branch is fast becoming a thing of the past. Three large US institutions; Bank of America (NYSE: BAC), Citigroup (NYSE: C) and JPMorgan Chase (NYSE: JPM) closed 389 branches over the past year.

Bank of America; popularly known as BOA closed 112 financial centers, Business Insider reported. Citigroup closed 116 branches or 7% of its footprint over the past year. Chase; America’s largest bank went even farther closing 161 branches during the same time period.

There might be even more closings to come, Wells Fargo (NYSE: WFC); which is reeling from a scandal involving fake accounts, may have to close even more banks. Analyst Mike Mayo told CNN Money that he thinks Wells Fargo will have to close 1,000 branches just to stay in business.


Digital is Slowly Killing the Brick and Mortar Bank

Digital banking is slowly killing physical banking. JPMorgan Chase CFO Marianne Lake told investors that 35% of new credit card originations at her bank took place online. She also said 17% of the bank’s customers used its mobile app Chase Pay.

Banks have a strong incentive to go mobile and digital they make more money from app-based transactions. The cost of an app-based transaction at Bank of America is one tenth that of a teller transaction, BOA Chief Financial Officer Paul Donofrio told shareholders. If Mr. Donofrio is correct, BOA can increase its profits by 90% by getting its customers to use its app or Apple Pay.


That gives banks a strong incentive to shut down brick and mortar branches. They cut costs and drive more business to more profitable apps in one fell swoop.

Tens of Thousands of Banking Jobs Vanish

There is a very dark side to the banking-app revolution, thousands of jobs are vanishing. Bank of America is planning to eliminate 8,000 jobs from its consumer-banking division.

Technological unemployment is about to get far worse as thousands of educated middle and lower middle-class Americans face job loss. What will all those people do for a living? There is no way they will all be able to drive for Uber or host for Airbnb.

Such technological unemployment is likely to become a major political issue in the near future. The successful insurgent presidential campaigns of Donald J. Trump and U.S. Senator Bernie Sanders (D-Vermont) were driven by anger about disappearing jobs and growing income inequality.

If this trend progresses to its logical end bank tellers will disappear much like elevator operators did. It also raises a fascinating question: what will communities do with all those empty bank buildings?

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