Dive Brief:

• Banks shed 6,764 branches in the U.S., or 7% of the total number, from 2012 to 2017, according to a Federal Reserve report released Monday.
• The report highlights a widening gap between banking services in urban and rural areas. It identified 44 "deeply affected" counties that had 10 or fewer branches in 2012 and lost half or more of them by 2017. Thirty-nine of those counties are rural, the Fed said.
• The report also broke down data between counties that lost branches and those that gained. Losses, again, were steeper in rural areas. Rural counties that lost branches between 2012 and 2017 did so at a 14% rate, the report said. For urban areas, that figure was 9%.  ​

Dive Insight:

The report, which Federal Reserve banks gathered through listening sessions they held throughout the country from July 2018 to January 2019, highlights the disproportionate effect bank consolidation has on rural areas and already disadvantaged populations.

"Rural counties deeply affected by branch closures had higher poverty rates, lower median incomes, a higher share of their population with less than a high school degree, and a higher share of their population who were African American," the report said. 

Although consumers are increasingly relying on fintechs or accessing financial services through digital methods, "bank branches remain the most widely used way for individuals to access a bank account," the Fed found. Many rural residents told the Fed these alternatives don't fill the void left by a shrinking brick-and-mortar presence.

"Some participants described how the remaining banks available to them do not offer online or mobile services, or have only limited digital offerings, which they felt restricted the types of activities they could carry out," the report found.

Small businesses, in particular, expressed a preference for local banks, which they said might offer greater credit availability, more favorable terms and more transparency. Local lenders, they said, "understood their market, and [were] more willing to put in extra effort to identify creative ways to fulfill loan requests."

Some rural residents also cited connectivity as an obstacle. "Participants highlighted the fact that broadband internet and cellular phone service is not sufficient, reliable, or affordable enough in their communities to allow for a substitution to online banking," the Fed's report said.

A June study from Penn State University in conjunction with the Center for Rural Pennsylvania found that rural broadband speeds across the country, on average, are lower than the minimum required by the Federal Communications Commission.

"While participants appeared to be finding creative ways to fulfill their need for certain financial services, primarily access to cash, many reported they simply had not found substitutes for certain services within their local community and therefore had to either decide to go without or drive long distances to access these financial services," Monday's Fed study found.