Economic Mobility Project
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Policy Brief, November 2023
The Location of Bank Branches Matters


In a recent study, we used anonymized cell phone pings in and around bank branches to determine that one of the main reasons that households in predominantly Black communities use fewer banking services is that brick-and-mortar branches are located farther away from them. We find that although the Black communities’ demand for banking services is similar to that of predominantly White communities, there are on average 5.6% fewer trips to a branch per month because of the increased distance. The study also looks at low-income communities and finds that they do not experience this barrier; they do not have to travel farther to access branches. However, low-income communities do exhibit less demand for banking services generally, which leads them to use branches less.

We identified significant differences by geography as well, with residents of the Deep South having the least bank branch access compared to other regions and rural areas exhibiting a staggering two-thirds less access than metropolitan areas. We also found that there is a wide variation in access within metropolitan counties. The differences in access among neighborhoods in a metropolitan area are comparable to the differences we see between rural and urban counties.

The model developed in this research is of note as it was able to estimate access to bank branches for groups down to the level of a census block group—a cluster of blocks—from privacy-protected cell-phone data. Our innovative methodology holds promise for researchers studying access issues in many fields, such as healthcare and nutrition.


Bank branch services have retained their importance in the digital age, yet the number of bank branches has been declining for more than a decade, with closures accelerating during the Covid-19 pandemic.

According to the Federal Reserve’s 2019 Survey of Consumer Finances, branch location is cited most frequently as the most important reason for choosing where to open a main checking account (43% of respondents). Despite advances in mobile and online banking over time, the proportion of respondents citing branch locations as their most important reason has remained roughly unchanged since 1989 (between 43% and 49%). This suggests that mobile banking remains an imperfect substitute for bank branches. Further, we find that respondents in the lowest income bracket (<$15K annually) are roughly 25% more likely than those in the highest bracket (>$75K annually) to say ATMs/bank tellers are their primary method to access their bank account.

The reduced use of banking services in low-income communities is well documented, but the explanations are many and complex. Residents may not use the premium services that modern branches offer, such as wealth management and/or small business banking, but they also likely have similar reasons for avoiding banks as one would find in the unbanked population. The 2021 FDIC Survey of Unbanked and Underbanked Households report found the main reasons cited for not wanting to interact with a bank and open an account include:

  • Don’t have enough money to meet minimum requirements
  • Don’t trust banks
  • Bank fees are too high or too unpredictable

Policy considerations

Our study suggests the need to expand branch access to Black communities and to continue to further examine the banking needs of low-income communities and the alternative financial services that these households are using. In the study, we consider the current postal banking proposals being discussed. Under these proposals, post offices would offer limited banking services such as savings, checking, and some types of credit. We show that the chances of these proposals addressing bank access deficiencies depend heavily on implementation.

Given that there are more post office locations in White communities, simply adding banking services universally could potentially widen the gap in bank branch use. However, if the program were to offer the highest quality bank branch services (top 10% of private banks’ offerings), it could narrow the gap. Our study did not model what might happen if postal banking was successful in lowering other barriers to branch use, such as distrust of private banks, as well as increasing competition. In these scenarios, it is very possible that postal banking could have an important impact on the gap in bank branch use—both increasing demand among low-income households and improving access for Black communities.

Banking services that grow solely in response to demand will cater to those who use them the most, so it is important to continue to study why some groups have reduced branch use with the goal of ensuring banking services can evolve to serve everyone. In addition, given that natural market forces are moving to reduce the number of branches, there is a very real possibility that this issue of access will get worse without intentional policy action. Policy considerations could include additional tax incentives, subsidies, and regulatory measures to expand access and shrink the use gap. Existing local institutions, such as community development banks, could be tapped to further support these efforts. Currently, mobile banking is not a perfect substitute for bank branch services. Shrinking the branch use gap is an important policy goal for the economy and our communities to help ensure that savings, credit, and other tools to enhance financial security are available to everyone.

Opinions expressed in this article are those of the author(s) and do not necessarily reflect the views of the Federal Reserve Bank of Chicago or the Federal Reserve System.

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