Research on Bank Branch Penetration

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Updated on Wednesday, February 17, 2016

MagnifyMoney has conducted a study of bank and credit union branch concentration in America, and the results indicate a strong correlation between race and the presence of branches. Counties that are majority white have much higher branch penetration than minority communities.

This data has been gathered using FDIC and NCUA branch data along with United States Census data. The full report can be downloaded here.

Key Findings

  • In counties that are majority (more than 50%) white, there are 40.6 financial institutions for every 100,000 people
  • In counties where more than 50% of the population is not white, there are only 27.1 financial institutions for every 100,000 people
  • Native Americans have the lowest bank branch penetration, with only 20.53 per 100,000 people, which is half the number of branches found in white communities.
  • Majority Hispanic communities have 22.51 branches per 100,000 people and majority black communities have 32 branches per 100,000 people

The image below demonstrates the branch penetration based upon the percentage of whites in the county. As you can see, the higher the percentage of white residents in a county, the more bank branches that are available:

The following image has been created for black communities. You can clearly see that the fewer the African Americans living in a community, the more bank branches:


  • Bank branches provide communities with access to vital, affordable financial products. In particular:
    • Checking accounts are foundational products that provide access to the financial system. Checking accounts are essential transactional products, enabling people to cash checks, make payments and store savings. In the absence of checking accounts, consumers turn towards:
      • Check Cashing Companies: in order to have immediate access to cash, consumers pay fees and commissions at check cashing companies, which can be up to 4% of the check amount.
      • Pre-paid Cards: In order to make payments and avoid carrying cash, consumers turn towards prepaid cards that can often be loaded with fees and charges.
    • Credit cards, personal loans and overdraft lines of credit are offered by most banks. In the absence of bank branches, payday lenders and pawn shops often fill the lending vacuum.
      • Payday lenders typically charge $15 – $20 for every $100 borrowed for a two week period. More importantly, payday lenders provide instant access to cash to help fulfill a short-term need. For consumers who repeatedly use payday lenders, the effective APR can exceed 400%.
        • Interestingly, payday lenders are not always more expensive than overdraft fees charged at traditional banks. Overdraft fees at the largest banks average $35 per incident. In extreme cases, consumers can be charged $70 to borrow $6 for 6 days.

Important: The presence of bank branches does not necessarily mean that the most economically marginalized individuals will have access to products that meet their needs. And for consumers with strong credit scores, bank branches are not required for access to those products.

Small businesses rely heavily upon banks for financing, and the bank branch plays a large role in the underwriting process. 48% of business owners use a major bank for their financing needs, and an additional 34% use a regional or community bank. Without a neighborhood branch, small businesses owners can find it difficult to find working or growth capital.


Historically, the bank branch has been the key to accessing the banking system. And for many people, that remains the case. However, digital and mobile technology are rapidly replacing traditional bank branches for the distribution and maintenance of financial products. Increasingly, alternatives to traditional bank branches have been appearing. Here are some new alternatives:

  • Traditional bank accounts can now be replaced with Pre-Paid and Internet-Only accounts that have significantly reduced fees. Low or no-fee pre-paid accounts are now being offered by major banks. Many of these accounts offer mobile deposit functionality. However, check holding periods remain a challenge for many consumers who still turn to check cashing companies, especially for people who have had a history of bounced checks.
  • Short-term borrowing needs for consumers are increasingly being filled by marketplace lenders. A number of lenders are experimenting with lending models that do not rely upon FICO.
  • Small businesses can increasingly borrow money online. However, many of the new marketplace small business lenders charge extremely high interest rates, which have the risk of trapping businesses in un-affordable and costly debt. In addition, most new marketplace lenders hold borrowers personally liable for borrowings, increasing the risk for the individual.


Despite the growth of alternative products for banking and borrowing, significant challenges remain for the most economically marginalized. Neither bank branches nor startups have been able to solve the following consumer needs:

  • The need to have rapid access to cash: 56% of Americans have less than $1,000 combined in their checking and savings accounts. Living paycheck to paycheck means that many people need to cash their check immediately upon receipt. Imagine someone has to pay the electricity bill. The tradeoff is between paying a check cashing company to have access to the funds immediately, or paying a late fee to the utility company and possibly having electricity switched off. Many people would rather pay a check cashing fee and get immediate access to their money. Until banks find ways to get immediate access to a bigger portion of checks, check cashing alternatives will remain appealing.
  • The need to borrow money on a short-term basis. A significant portion of the new internet-only checking accounts and prepaid cards eliminate overdraft fees. But these accounts also eliminate the ability of people to borrow money. Many people will have the need to obtain access to short-term credit. In the absence of low-cost alternatives from banks, people will continue to turn towards payday lenders. Many banks would like to offer short-term loan options. And some regulatory agencies (the Consumer Financial Protection Bureau) would like banks to offer affordable low-cost lending options. However, the prudential regulators (FDIC) worry about the risk of this business. So long as the regulatory environment remains conflicted, banks will not be able to expand into this business, and payday lenders will continue to fill the gap in the market.

Views from MagnifyMoney Co-Founder Nick Clements:

In an increasingly digital world, bank branches are no longer required to access a number of financial services. Consumers can now open bank accounts with internet-only banks and use their cell phones to deposit checks. People can quickly apply for credit on their phones, and have the money deposited to their internet-only bank account the next day. And lenders are increasingly finding ways to use alternative data sources, helping more people qualify for better products.

However, traditional bank branches remain critical to small businesses that require affordable working or growth capital. Minority communities have fewer bank branches. As a result, businesses that are owned and operated in minority communities with fewer branches will likely have less access to affordable capital.

In the absence of bank branches, payday lenders, check cashing companies and pawn shops often take their place. Consumers with excellent credit scores need to recognize that they can use their phones to shop for, open and maintain excellent financial products. They no longer need to choose their lender based upon the proximity of the branch.

Unfortunately, new marketplace lenders, internet-only banks and even traditional bank branches still provide limited value to the most economically marginalized people. When banks hold checks for too long, check cashing companies remain in business. When people have an immediate borrowing need, often only payday lending companies are willing to lend quickly. There is still a shortage of products from traditional banks and startups that meet the needs of the most vulnerable.

10 Worst Counties

Below are the majority black counties that have the lowest branch penetration rates: