Changes in Retail Banking Landscape Result in Increased Banking Deserts in the U.S.
The retail banking industry in the United States has undergone significant changes, leading to the emergence of more banking deserts, including areas in Hampton Roads.
Definition of Banking Deserts
Banking deserts are defined as census tracts that lack a physical bank branch within a specific geographic radius from the population center. These deserts occur when banks are located more than 2 miles away from urban areas, 5 miles away from suburban areas, and 10 miles away from rural communities.
The closure of banks and the consolidation of financial institutions following the 2008 financial crisis contributed to the initial rise in banking deserts. However, the pace of branch closures has accelerated during and after the COVID-19 pandemic. According to a national report published by the Federal Reserve Bank of Philadelphia, the total number of bank and credit union branches in the U.S. decreased by 5.6% between 2019 and 2023, resulting in an increase of 217 banking deserts.
Impact on Hampton Roads
In Hampton Roads, there has been a significant reduction in bank branches. According to market share reports from the Federal Deposit Insurance Corp., the region experienced a 38% reduction, losing 143 bank branches from 2008 to 2023. In 2019 alone, there was a 22% reduction of 69 branches. These figures do not include credit unions.
Shift Towards Digital Banking
The closure of bank branches aligns with the growing popularity of digital banking, including mobile and online services, as well as the use of kiosks and ATMs. Consumers no longer need to visit physical bank branches for their transactions.
However, banking deserts disproportionately affect individuals who face challenges with transportation, lack access to digital services and high-speed internet, and struggle with navigating websites and apps. This issue particularly impacts consumers with lower incomes, disabilities, or language barriers who still prefer in-person banking.
Sustainable Development Goals (SDGs)
- SDG 1: No Poverty
- SDG 3: Good Health and Well-being
- SDG 4: Quality Education
- SDG 5: Gender Equality
- SDG 8: Decent Work and Economic Growth
- SDG 9: Industry, Innovation, and Infrastructure
- SDG 10: Reduced Inequalities
- SDG 11: Sustainable Cities and Communities
- SDG 17: Partnerships for the Goals
Banking Deserts in Virginia
According to the Federal Reserve’s interactive dashboard map, several areas in Hampton Roads, including parts of Virginia Beach, Chesapeake, and Suffolk, are considered banking deserts. The nearest bank branches in these areas are located between 2 to 9 miles away. These regions are a mix of urban and suburban areas.
Additionally, a small urban tract in the Lee Hall section of Newport News, as well as certain areas in Norfolk and Virginia Beach, require consumers to travel between 2 to 3 miles for their banking needs.
While Hampton, Portsmouth, Poquoson, Williamsburg, James City County, and York County do not have any banking deserts, Mathews County is marked as a potential desert, meaning it is one branch closure away from becoming a desert.
Bank Closures in Hampton Roads
Both larger banks and community-based banks have reduced their physical presence in Hampton Roads in recent years. The merger of BB&T and SunTrust as Truist in late 2019 resulted in a significant consolidation of branches in the region. Bank of America and Wells Fargo have also closed multiple branches across Hampton Roads.
Old Point National Bank, based in Hampton, has closed several branches in the past few years and announced the upcoming closure of its downtown Norfolk branch in September.
TowneBank’s acquisition of Farmers Bank led to the closure of Farmers branches in Pungo and Chesapeake last year. TowneBank also closed its Harbour View branch in Suffolk.
PNC Bank is planning to close a standalone branch in Virginia Beach in October as part of its ongoing effort to optimize its physical bank network.
Conclusion
The increase in banking deserts in the U.S., including areas in Hampton Roads, highlights the need to address the challenges faced by individuals who rely on in-person banking services. Bridging the gap between digital banking and traditional banking is crucial to ensure equal access to financial services for all members of society, regardless of their income, location, or abilities.
For more information and to view the banking deserts dashboard, visit fedcommunities.org/data/banking-deserts-dashboard/.
Sandra J. Pennecke, 757-652-5836, sandra.pennecke@pilotonline.com
Originally Published:
SDGs, Targets, and Indicators
1. Which SDGs are addressed or connected to the issues highlighted in the article?
- SDG 1: No Poverty
- SDG 8: Decent Work and Economic Growth
- SDG 9: Industry, Innovation, and Infrastructure
- SDG 10: Reduced Inequalities
- SDG 11: Sustainable Cities and Communities
- SDG 17: Partnerships for the Goals
2. What specific targets under those SDGs can be identified based on the article’s content?
- SDG 1.4: By 2030, ensure that all men and women, in particular the poor and the vulnerable, have equal rights to economic resources, as well as access to basic services, ownership, and control over land and other forms of property, inheritance, natural resources, appropriate new technology, and financial services, including microfinance.
- SDG 8.10: Strengthen the capacity of domestic financial institutions to encourage and expand access to banking, insurance, and financial services for all.
- SDG 9.3: Increase the access of small-scale industrial and other enterprises, in particular in developing countries, to financial services, including affordable credit, and their integration into value chains and markets.
- SDG 10.2: By 2030, empower and promote the social, economic, and political inclusion of all, irrespective of age, sex, disability, race, ethnicity, origin, religion, or economic or other status.
- SDG 11.1: By 2030, ensure access for all to adequate, safe, and affordable housing and basic services and upgrade slums.
- SDG 17.17: Encourage and promote effective public, public-private, and civil society partnerships, building on the experience and resourcing strategies of partnerships.
3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?
- Number of bank branches in the U.S.
- Number of banking deserts in the U.S.
- Percentage of census tracts in Virginia that are banking deserts
- Percentage of census tracts in Virginia that may become banking deserts if a branch closes
- Percentage of census tracts in Virginia with limited access to broadband
- Number of bank branches in Hampton Roads
- Percentage reduction in bank branches in Hampton Roads
SDGs, Targets, and Indicators
| SDGs | Targets | Indicators |
|---|---|---|
| SDG 1: No Poverty | Target 1.4: By 2030, ensure that all men and women, in particular the poor and the vulnerable, have equal rights to economic resources, as well as access to basic services, ownership, and control over land and other forms of property, inheritance, natural resources, appropriate new technology, and financial services, including microfinance. | – |
| SDG 8: Decent Work and Economic Growth | Target 8.10: Strengthen the capacity of domestic financial institutions to encourage and expand access to banking, insurance, and financial services for all. | – |
| SDG 9: Industry, Innovation, and Infrastructure | Target 9.3: Increase the access of small-scale industrial and other enterprises, in particular in developing countries, to financial services, including affordable credit, and their integration into value chains and markets. | – |
| SDG 10: Reduced Inequalities | Target 10.2: By 2030, empower and promote the social, economic, and political inclusion of all, irrespective of age, sex, disability, race, ethnicity, origin, religion, or economic or other status. | – |
| SDG 11: Sustainable Cities and Communities | Target 11.1: By 2030, ensure access for all to adequate, safe, and affordable housing and basic services and upgrade slums. | – |
| SDG 17: Partnerships for the Goals | Target 17.17: Encourage and promote effective public, public-private, and civil society partnerships, building on the experience and resourcing strategies of partnerships. | – |
Source: pilotonline.com
