Off-Premise Banking

Off-premise banking refers to any bank location, other than its main location, that provides banking services of any kind that don't require tellers. Off-premise banking locations can be found in convenience stores, airports and shopping centers. ATMs can normally be referred to as off-premise banking locations. Off-premise banking can also refer to transactions that occur at off-premise banking locations, such as at ATMs.

For example, Bank A has its main headquarters in Pittsburgh. Bank A has about 25 full-service branches that offer customers access to tellers and bank managers, loan officers and other customer service representatives. These branches also offer a full range of banking products, from demand deposit accounts to mortgages and auto loans.

Bank A wants to make it more convenient for customers to withdraw and deposit money, so it sets up ATMs at local shopping malls, department stores, gas stations, grocery stores, parking garages and other locations. It establishes a network of about 100 ATMs in the local area that customers can use to withdraw and, in some cases, deposit funds.

These ATMs do not provide access to human teller services, and they are in addition to ATMs that may be located on the premises of Bank A’s branches. These are off-premise banking locations, and the transactions that take place at them are off-premise transactions.

Off-premise banking locations are usually very expensive to establish. The bank in the above example will need to come up with investment capital to lease space for its off-premise locations, buy and ship the ATMs it needs, and service and maintain these ATMs.

However, off-premise banking locations tend to be profitable entities for the bank over the long run. This is because they tend to have a superior cost-to-transaction ratio than traditional bank locations staffed by personnel. The costs of maintaining an off-premise banking location are much lower than the costs of maintaining a branch or even a mini-branch staffed by a single teller, and ATMs have a universal appeal; many of the customers who use a well-placed ATM may not even necessarily be customers of the bank that has placed that ATM. Banks can profit greatly from the collection of ATM usage fees and other off-premise banking fees; in 2016, JPMorgan Chase, Wells Fargo and Bank of America earned $1.1 billion from ATM fees alone.