Savings Banks Starting Store Diet, Sudogwon Area Sees Temporary Increase (Comprehensive)

Savings bank branches briefly increase mainly in the Seoul metropolitan area
Some expect the 'downsizing trend' to continue

[Asia Economy Reporter Song Seung-seop] The savings bank industry, which had been accelerating its 'branch slimming' amid 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 trimming excess branches.

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 temporary increase mainly in the metropolitan area. Seoul had 151 branches, up 4 from the previous year, and Incheon and Gyeonggi regions added 3 branches, totaling 64. Incheon and Gyeonggi have been regions where branches have steadily increased since 2016, when there were 56 branches.

Among the six sectors of savings banks, the regions where branches decreased were Busan, Ulsan, and Gyeongnam, and Gwangju, Jeonnam, Jeonbuk, and Jeju, each decreasing by one branch, reaching 39 and 16 respectively. Daegu, Gyeongbuk, Gangwon, and Daejeon, Chungnam, Chungbuk regions remained unchanged at 18 branches each.

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 said, "One of the core sales methods of savings banks is relationship-based sales rooted in the local area," adding, "Branches are an essential base for improving accessibility and for employees working on-site."

Even though metropolitan branches briefly increased, branch slimming continues

There is also a view that the overall trend of branch slimming will continue. Offline branch users are decreasing, while demand for non-face-to-face and online services is rapidly increasing. According to the Korea Development Institute, the number of domestic internet banking registered customers in the first half of last year was 1,647.9 million, a 3.5% increase compared to the end of the previous year. The number and amount of various inquiries, fund transfers, and loan services via internet and mobile also increased by 25.5% and 10.9% respectively compared to the second half of the previous year.

There is also a need to improve cost efficiency in preparation for competition with fintech companies like Kakao and Toss, which do not have branches, and P2P companies. In particular, savings banks must compete in the mid-interest rate market with those who handle all financial tasks non-face-to-face. Given the many expenses required for digital innovation and various marketing efforts, it is impossible to maintain offline branches that do not generate profits indiscriminately.

As a result, concerns have been raised that financially marginalized groups, including the elderly and those who find it difficult to use non-face-to-face and digital financial services, may be adversely affected. Although the 2030 generation is being actively targeted recently, since the traditional main customer base was older, the impact could be greater compared to the branch reduction of commercial banks.

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 proposing an amendment to the Mutual Savings Banks Act. The key point is to change the regulation from requiring approval to establish branches to a notification system. For business offices, it will be changed to post-reporting.

A representative of a savings bank criticized, "People visiting offline branches have already rapidly decreased," adding, "With no one visiting branches and capital expansion regulations in place, it is doubtful whether the industry will proceed with branch establishment." Then, "

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