Chase Bank
A traditional bank branch costs $2-4 million to set up with operating costs at $200,000 to $400,000 per year.

Customers in the United States are still more inclined to visit brick-and-mortar bank branches even as banks are pushing the use of online tools, crippling the industry’s effort to streamline their operations.

Banks in the U.S. have already reduced the number of branches by 6 percent after peaking in 2009, according to Federal Deposit Insurance Corp data. The current number of bank branches at 93,283 at the end of the previous year was the lowest in record, but low interest rates and regulatory demands are pressuring banks to reduce the number of locations open.

The number of banks insured by the FDIC fell more than 25 percent in spite of growing assets in the industry. This is a sign that there is room for greater branch consolidations.

However, bank managers argue that the branches are important to acquire new customers and keep their relationship with existing clients, and that closing the branches might reduce costs, but the impact on revenues will be greater.

“Our customers still want to visit us,” Jonathan Velline, Wells Fargo’s head of ATM and store strategy, told Reuters. “They’re still coming to our stores and our ATMs at pretty consistent rates.”

Bankers agree. According to them, online banking is a complement to traditional services, with few going fully digital.

Banks have been slimming down all over the world and the U.S. ranks in the middle among developed countries, according to the International Monetary Fund’s population-adjusted data. Compared to Germany, France or Canada, the U.S. has reduced more branches, but it doesn’t compare to the cuts made by Greece, Ireland, Spain or Italy.

One of the most important reasons customers use banks is the processing of check deposits, said Rick Spitler, managing director at consulting firm Novantas.

FDIC Chief Economist Richard Brown said that “we have mobile banking and high-tech banking, therefore the branch offices are dinosaurs and going away appears to be substantially overstated.”

A traditional bank branch costs $2-4 million to set up with operating costs at $200,000 to $400,000 per year, according to Ed O’Brien, an analyst at Mercator Advisory Group. With bank branches clustered in costly urban centers, their existence is considered very expensive.

Bank executives say, however, that in order to stay competitive, banks need to be present within the vicinity of their best customers.

A branch, according to JPMorgan Chase & Co, earns about $1 million in annual profit, but it takes about 10 years before it can reach its full potential. The company has been looking at data on what customers do while inside the bank to determine whether it should stay open, close or shrink.

Since 2013, the bank has closed about 5 percent of its branches, but despite the shutdown of its 265 locations the bank’s physical presence, according to executives, is still the best way for them to have a relationship with clients and sell a range of products and services. In addition, customers still expect contact with bank staff forcing JPMorgan to hire more tellers after customer complaints.