Digital Banks Say Branches Don’t Matter. Traditional Banks Say They Matter More Than Ever. Who’s Right? | Banking Advice
Key Takeaways
- Now that mobile banking has become routine for many people, some digital banks with no branches are working to become the primary institution for more depositors.
- At the same time, several major traditional banks are doubling down on branches.
- The declining need for teller services also has some banks revamping their physical locations for the future.
If the competition between traditional banks and their digital rivals were a sporting event, Ally Bank’s recent marketing campaign would undoubtedly be characterized as bulletin board material.
Except no bulletin board would be necessary in this case. Ally made sure the message was easily visible.
Splashed across at least five stories of the digital bank’s parking garage in the U.S. banking hub of Charlotte, North Carolina, was a banner poking fun at the bank branch, wielding a Southern phrase to perhaps suggest that the brick-and-mortar concept was becoming an outdated relic.
“Actually go to the Bank? Bless Your Heart,” read the banner, which was unveiled in May as part of the digital bank’s “Life Today” campaign aimed largely at younger generations. Ads in other cities told savers that no branches meant higher yields and fewer fees for them.
The ad was a “playful” way of making a point, says Andrea Brimmer, Ally Financial’s chief marketing officer and public relations officer.
“It’s a phrase that’s deeply rooted in the local culture and can carry a range of meanings,” says Brimmer. “So we leaned into that familiarity with humor to highlight a simple point: Banking today does not necessarily have to revolve around a physical branch.”
The campaign reignited a debate that has now been ongoing for years: Will the bank branch soon become obsolete?
Online-only banks and fintechs are growing in popularity and assets. Most customers conduct the overwhelming majority of their banking on apps or their bank’s website. Younger customers in particular are perfectly comfortable managing their finances on their phones.
One-quarter of respondents in a recent U.S. News survey say their primary institution is now a digital bank. Younger consumers are more likely to fall into this camp, with 34% of those ages 45 and under banking primarily with an online institution. There are 15,000 fewer bank branches in the U.S. today than there were a decade and a half ago.
This all makes a strong case for the branch’s eventual demise.
But recent developments suggest some of the nation’s largest banks believe branches may hold more value than you might think. Instead of trimming their branch inventory, these banks are betting that more locations will pay off – even if most of their customers rarely visit.
‘That Billboard Effect is Very Real’: Why Some Banks Are Adding Branches
When you need to check your balance, transfer funds or withdraw cash, you’re probably not stopping by the teller at your local branch. These tasks and more are easily managed through your bank’s app or online.
More than three in four bank customers now cite apps or their bank’s website as their preferred method for managing their accounts, according to a 2025 American Bankers Association survey. Only 9% say they prefer a branch.
But people still like the existence of a branch. In the U.S. News survey, 73% say proximity to a branch is important to them. The reasoning isn’t a desire for convenience. Instead, there’s more of a psychological factor, says Mike Abbott, senior managing director and global banking lead at Accenture.
“It gives them confidence that their money is safe, that if they have a problem they can walk in and talk to somebody,” says Abbott. “It’s like an Apple store: You know the Genius Bar is there.”
It also gives such banks a leg up on digital banks, Abbott’s research found. More than three-quarters of U.S. consumers say a branch network makes a bank feel more stable and reliable than digital-only banks, according to Accenture’s 2026 Banking Trends report.
“Banking inherently is about trust,” says Abbott. “Do I trust you to give you my money? If (a branch) is there, I can trust you’re there.”
A branch also serves as a billboard of sorts, alerting people in the area that a bank has a local presence and is open for business, he says.
Some major banks and “super regional” challengers are aggressively adding branches, viewing an expanded physical footprint as a path to sustained growth through a signal of strength.
Few have been as bullish on branches as PNC Bank. The Pittsburgh-based large regional plans to build 300 new branches by 2030 and renovate all of its existing branches as well. The bank opened its 50th new location as part of that effort earlier this month in Florida.
One reason PNC is moving full steam ahead on branches is that the bank sees the new locations pay off on the digital side as well, says Alex Overstrom, PNC’s head of retail banking. He says online account openings are six times higher in areas with a dense branch presence than in locations without a nearby physical location.
“I think that reflects this large set of the population that values the presence of a branch, and also the awareness that it creates,” says Overstrom. “That billboard effect is very real.”
Alongside its branch expansion, the bank also rolled out a new mobile app to customers this year.
The Allure of the Digital Bank: High Yields, No Fees
Digital banks can vary significantly in their size and products, and some may not offer more than a high-yield savings account and a couple of certificates of deposit. Those shops likely aren’t making a push to be the average consumer’s main bank.
Others, such as Ally and fellow online powerhouse SoFi, provide suites of products that rival the largest institutions, and they’re aiming to be the primary bank for a growing number of people. Brimmer calls becoming customers’ everyday bank a “key strategic priority.”
“We want to be the financial partner people reach for in the day-to-day moments that matter, not just the big milestones they’re planning for down the road,” says Brimmer.
With nearly $200 billion in total assets and 9.6 million customers, Ally is the largest online-only bank in the U.S. and among the 25 biggest banks overall. It reported $144 billion in retail deposits in the second quarter of this year, up $408 million year over year.
Because online banks aren’t burdened with the costs of operating physical locations, they typically can offer higher interest rates and lower fees than their brick-and-mortar peers. That’s one of the main attractions for many savers who switch over. During the peak interest rate period of 2023-24, some digital banks offered savings yields of over 5%, although those rates have fallen since. Traditional banks often pay near zero interest on their savings accounts.
The New Branch: Coffee Bars, Comfy Chairs, Fewer Tellers
With lessening demand for traditional teller services, institutions are revamping their physical locations for the future.
BECU, the nation’s fourth-largest credit union, is opening a handful of new branches in Washington state in 2026 and is in line to add 17 more in California through a pending merger. Most of its locations are tellerless, says Kim Lybecker, BECU’s senior vice president of retail strategy and optimization.
Instead, members are greeted by consultants who can provide guidance but don’t handle cash. The branches are also equipped with video banking screens, where a customer can chat one-on-one with a specialist, such as a mortgage advisor.
“The conversations and what we’re doing in (branches) is fundamentally changing from that pure transaction to more of the advice-guided and advice-led interactions,” says Lybecker.
While PNC still employs tellers at every branch, Overstrom says the bank has also shifted to focus more on advice-driven interactions. He says a new or renovated PNC branch is designed to feel similar to a hotel lobby.
“They’ve got living rooms in them,” says Overstrom. “We’ve got coffee bars, beverage centers. It’s a very welcoming environment.”
The Depositor’s Dilemma: Which Style of Bank to Choose
As a self-described “bank hopper,” Willis Allstead has experienced the pros and cons of both online and traditional banks. The 29-year-old engineering director from Reno, Nevada, has held his primary bank accounts at two digital banks, two fintechs and a traditional branch bank.
During one stretch, he jumped from Ally to a fintech app to Wells Fargo. “That’s a weird pipeline,” he acknowledges.
But Allstead’s experience highlights how the modern-day bank customer often must settle for trade-offs when choosing between banking options.
Allstead, who is also the founder of Bonsave, a smart financial planning app that provides personalized insights, is adept at researching various accounts. He typically prefers digital banks because they usually offer higher savings interest rates and charge fewer fees.
But several years ago, when he managed his primary accounts in a fintech app, he learned firsthand what can happen if customer service is limited.
Traveling in Europe, he’d just finished a meal and was attempting to pay the bill when his account became locked.
“I’m trying to pay for this restaurant, the guy’s kind of waiting for me, and I’m like, ‘I’m actually locked out of my entire bank,'” recalls Allstead. “I get on the phone, I’m waiting for an hour to actually talk to a real human. Even when I do get connected, it was just someone who really didn’t understand what I was saying. It was just a struggle.”
Disenchanted by that experience, Allstead altered course and moved his accounts to banking behemoth Wells Fargo, where his mother had been a longtime customer.
He’s since switched banks again, this time to SoFi, which offered a much higher savings yield than Wells Fargo.
“Whatever money I did have in a savings account was just kind of decaying over time with the powers of inflation,” Allstead says.
Elizabeth Miner, 58, says she’s banked with Capital One for more than a decade. As a digital nomad living in Puerto Rico, she’s comfortable doing essentially all of her banking online.
But the international business advisor is also a big fan of branches – at least Capital One’s cafes that are a blend of a bank and a coffee shop. She says she regularly works remotely in the cafes when she’s in the U.S. and often meets there with clients.
She doesn’t necessarily miss the local brick-and-mortar institutions she banked with in the past, although she recalls one experience she doubts would happen now. An incoming wire transfer she was expecting came through, but the sender got her account number slightly wrong. A bank representative noticed it was likely intended for her and alerted her to the mix-up.
“That’s the beautiful thing about the regional banks and knowing your banker,” she says.
