Before Banks Collapse

 Before Banks Collapse

The dominance of banks on most street corners in America has grown so widespread that it is impossible to avoid seeing one on any given street corner in your town. Fast food joints, dry cleaners, gas stations, and convenience stores used to occupy prime real estate at major intersections, but now banks are the dominant tenants. There are instances where multiple bank branches can be seen occupying three of the four corners of a busy town junction.

Before Banks Collapse

Banking institutions are investing a ton of money to open branches in almost every free space in town, which makes you wonder how many banks are necessary and why. You can't help but notice this business trend and wonder what's behind the sudden surge in bank accounts. Well, it's not uncommon for those institutions to actually have fewer customers. When a community's population grows at a slower rate than its bank branches, it's hard to understand how the banks can afford to open so many new branches.

Over the past decade, the phenomenon has taken on a deeper meaning than in the past. Banking regulations are changing, and with those changes come new financial goals for these branches—goals that will bring in a ton of cash for the banks that are popping up all over town.

Changes in regulations. Over the past decade, there has been a dramatic shift in the regulations governing the number and locations of bank branches. There is a new density of banking options, including the option to open branches inside food stores. We can see this growing battle of branch banks happening all over town because of this.

There is an avalanche of service options. Commercial banks are now able to provide a plethora of new services, made possible by the relaxation of regulations governing branch banking. We usually picture banks as places to save our money, but when you visit one, you'll be bombarded with offers for a dizzying array of services, from investment choices to various credit packages. For the local banker, these services are a great source of income.

The true way that banks earn their profits. If your checking account continues to function normally, the bank obviously isn't making much money. But banks can lure you in with checking as a loss leader, so they can offer you credit and investment products that make a lot more money for them. Additionally, banks' ability to charge for overdraft accounts and other fee-based services is a direct route to their bottom line.

Being visible is important. When one bank wins over a consumer, it means less money for its competitors. They can use the funds in your accounts to make loans and earn interest if they manage to get a hold of your financial information. They want you to think of them first when you need a new account, so they're trying to get their name out there.

It seems doubtful that this tendency will abate very soon. Bankers are tough businesspeople, and the banking profession is known for its fierce competitiveness. That being the case, you can count on them to keep making an effort to win over customers and woo them away from other banks.

 Although it may be unsettling to see bank branches lining every street corner, it is a component of the market system that contributes to the strength of our economy. Plus, that's a plus. 

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