A Bulwark Against the Rise of Banking Deserts

SAN DIEGO COUNTY – Fueled by the Great Recession, the COVID pandemic and new technologies, brick-and-mortar financial institutions have seen a steady decline in the 21st century, creating what are now called “banking deserts” in some communities across the U.S.

Banking deserts are geographic areas, often in low-income or rural communities, where access to traditional banking services like bank branches is either limited or nonexistent.

According to a 2024 Reserve Bank of Philadelphia report, since 2019 the pace of bank branch closures has doubled in the U.S. which has brought about a 6% increase in census tracts without a branch to serve residents. The report also showed that while banks with more than $10 billion in assets were the majority of branch closures, credit unions remained the most resilient to closing their locations.

“Credit unions play a vital role in keeping financial services accessible — especially in communities that are at risk of becoming banking deserts. The reason is simple: our mission is different,” said North Island Credit Union President and CEO Steve O’Connell. “Credit unions are not-for-profit cooperatives with a fundamental purpose to serve our members and communities, not maximize profits or serve shareholder needs.”

The nonprofit model of credit unions allows them to focus on “long-term impact over short-term gain, according to California Coast Credit Union Vice President of Community Relations and Business Development Kyra Seay.

“This member-first model makes us uniquely equipped to meet the needs of under-resourced communities, particularly those labeled as banking deserts,” she said.

Opportunities in San Diego Promise Zone, Rural Areas

Even in an economically vibrant region such as San Diego, there are communities at risk of becoming banking deserts.

“All you have to do is look at low-income areas and you’ll see very few bank branches,” said Scott Norris, vice president of marketing for MyPoint Credit Union. “Some South Bay communities, City Heights, parts of Escondido are all low income with few bank branches.”

Within the City of San Diego, the urban areas most at risk of becoming banking deserts fall into what is referred to as the San Diego Promise Zone (SDPZ). In 2016, the SDPZ became one of 22 federally designated Promise Zones in the U.S. and one of only four in California.

The SDPZ spans 6.4 square miles from the southern parts of East Village into Barrio Logan and stretching east into Encanto and is home to over 80,000 ethnically diverse, and under resourced, residents. For credit unions, expanding access to these neighborhoods is an opportunity to not only open a new location, but also develop community partnerships that further their mission.

“For example, [Cal Coast’s] new Logan Heights Branch is designed with features that reflect what we heard directly from residents,” Seay said. “While it’s rooted in the Promise Zone, its reach will extend across our entire service area, bringing meaningful support to all members, especially those historically left behind.”

Beyond the SDPZ, Seay added, there are also “significant needs” that credit unions can fulfill in places like South County and parts of North County where there are still “large unbanked or underbanked populations, many of whom rely on high-fee financial services.”

In deciding where to open new branches, O’Connell said North Island Credit Union doesn’t solely rely on census data to guide its decisions, but it does use it to stay aware of potential banking deserts in the county, “particularly in areas like National City and parts of East and North County.”

“That’s one reason we’ve remained committed to serving areas like El Cajon and Chula Vista, where we operate full-service branches in close proximity to neighborhoods with few options,” he said. “Last year, we opened a new branch and community meeting space in Escondido, a location we selected not only because of the concentration of members in the area, but also because of the clear need for neighborhood banking options—accessible, local financial services delivered in person by people who understand the community.”

Technology Still Plays Vital Role in Serving Underserved

While credit unions have been proven to be more resilient in keeping brick-and-mortar branches open to underserved communities, like all of the financial industry, they are also focused on how digital services can also expand access to banking.

“There’s no question technology plays a significant role in helping us bridge service gaps and expand access – and we are continuously evolving our digital services to meet member needs and enhance their experience,” O’Connell said.

For example, North Island has launched a Virtual Branch that offers nearly the same services as its retail locations by phone or live chat and provides 24/7 support through an AI-powered virtual assistant named Georgia, which helps members with tasks like account questions and online banking navigation. North Island also expanded it financial literacy tools utilizing nonprofit financial wellness partners like GreenPath and Bite of Reality.

While banking technology platforms are now commonplace as more internet-savvy consumers choose to do business online, MyPoint’s Norris pointed out that the underserved communities most as risk of becoming a banking desert also tend to have lower technology adoption.

“Some don’t have ready access to the internet, due to the costs of the service,” he said.
According to Seay, digital banking technology can be a “powerful tool” for expanding access to services, “but only when it’s paired with intentional inclusion.”

“While mobile and online banking create convenience for many, we know there are still major digital divides, especially in the communities we serve. That’s why Cal Coast designs with equity in mind,” she said.

For example, Cal Coast’s Logan Heights branch offers a tech station with computers and a printer that’s available to the public — not just members — to use for tasks such as job searches and accessing online financial tools.

“And because many residents still prefer face-to-face service, the branch is walkable, on a major transit line, and staffed by bilingual team members trained to meet people where they are, both digitally and personally,” she added.

O’Connell also pointed out that credit union members put value on a mix of digital service offerings and personal service to match their different needs and “comfort level” with digital tools.

“While technology offers convenience and access, especially in underserved areas, in-person interactions remain invaluable for guiding members through more complex financial decisions,” he said. “We, as with most community-focused credit unions, believe members should be able to choose how they engage with us — whether it’s through a mobile app, a virtual branch visit, or a friendly conversation in a local branch.”