Shrinking Savings Banks... Sudden Increase in Metropolitan Area Branches

Savings bank branches briefly increase mainly in the Seoul metropolitan area
Expectations of continued reduction trend remain

[Asia Economy Reporter Song Seung-seop] The savings bank industry, which had been accelerating its 'store diet' due to the spread of non-face-to-face transaction culture, temporarily increased the number of branches last year. This is interpreted as a result of briefly expanding the sales network mainly in the metropolitan area to increase contact points with consumers while maintaining the overall trend of slimming down.

Savings Bank Branches Temporarily Increase Mainly in the Metropolitan Area

According to the Korea Federation of Savings Banks on the 9th, the number of savings bank branches nationwide, which was 324 in 2016, decreased by 18 to 306 as of November last year over four years. However, unlike the continuous decline over the previous three years, the number of branches increased by 5 compared to the previous year. This was a result of temporarily increasing branches mainly in the metropolitan area. Seoul had 151 branches, an increase of 4 from the previous year, and Incheon and Gyeonggi areas added 3 branches, totaling 64. In the case of Incheon and Gyeonggi, the number of branches continued to increase during this period.

Among the six sectors of savings banks, the regions where branches decreased were Busan, Ulsan, Gyeongnam, and Gwangju, Jeonnam, Jeonbuk, and Jeju, each decreasing by one branch, totaling 39 and 16 branches respectively. There was no change in Daegu, Gyeongbuk, Gangwon, and Daejeon, Chungnam, Chungbuk regions.

The fact that only the metropolitan area showed an increasing trend is interpreted as savings banks, which have fewer branches compared to first-tier banks, still viewing the Seoul area, where population and capital demand are high, as an attractive business location. A representative of a savings bank that opened a branch in Gangnam, Seoul last year explained, "One of the core sales methods of savings banks is relationship-based sales rooted in the region," adding, "Employees working on-site are necessary, and branches inevitably become an important base to improve accessibility."

The Overall Store Diet Trend Is Expected to Continue

There is also an expectation that the overall store diet trend will continue. Offline branch users are decreasing, while demand for non-face-to-face and online services is rapidly increasing. There is also a need to improve cost efficiency to prepare for competition with fintech companies like Kakao and Toss, which do not have branches, and P2P firms. In particular, savings banks are in a position to compete in the mid-interest rate market with those handling all financial tasks non-face-to-face. Given the many expenses required for digital innovation and various marketing efforts, they cannot blindly maintain offline branches that do not generate profits.

However, there are voices that the impact of the financial authorities' relaxation of branch regulations on the future branch operation strategies of savings banks should be observed. The Financial Services Commission announced in November that it would ease the standards for establishing savings bank branches by revising the Mutual Savings Banks Act. The main point is to change the regulation from requiring approval to establish branches to an authorization system. For business offices, it will be changed to a post-reporting system.

A representative of a savings bank criticized, "People visiting offline branches have already rapidly decreased," adding, "Given the capital expansion regulations, it is doubtful whether the industry will move to establish branches."

This content was produced with the assistance of AI translation services.