"Bank 4 Minutes Away, Now Takes 30 Minutes"... Branches Disappearing at a Rate of One Every Two Days

Four Major Banks Hold 2,891 Branches in Q3
Down 1,033 (26.3%) from 2015
Branches Decreasing by 200 Each Since COVID Outbreak
Banks Say "Improving Inefficiency by Consolidating Overlapping Branches"

[Asia Economy Reporter Song Seung-seop] Mr. A, who works at the security office of an apartment in Chang-dong, Dobong-gu, Seoul, takes a bus for about 20 minutes to handle banking affairs. He originally used the Hana Bank branch located a 4-minute walk away, but it was merged with another branch in 2020. He tried to switch to another bank, but KB Kookmin, Shinhan, and Woori Bank all closed their branches, so it takes about a 30-minute walk. Mr. A said, "I'm considering moving my account to a secondary financial institution branch that still remains."

It has been identified that commercial banks have reduced more than 1,000 branches over the past seven years through cost-efficiency strategies. The pace of branch mergers and closures, which began with the digital and non-face-to-face trend, accelerated further after the start of COVID-19. Financial authorities and banks are contemplating measures to prevent side effects caused by branch reductions.

According to each bank on the 23rd, the total number of branches held by the four major banks?Kookmin, Shinhan, Hana, and Woori?was 2,891 as of the third quarter of this year. The number of branches fell below 3,000 starting from the first quarter of this year. Compared to 2015, when the financial sector began rapidly reducing branches, the number decreased from 3,924 to 2,891, a reduction of 1,033 branches (26.3%). Converted into days, one branch of the four major banks disappeared every two days.

The decline in branches became steeper from 2020. This appears to be due to a decrease in customers visiting branches as offline activities declined because of COVID-19. From 2015 to 2019, branches decreased by about 100 annually, but in 2020, 225 branches closed, and in 2021, 221 branches closed. This year, the number decreased by 188 from 3,079 the previous year. Since 54 branches are scheduled for mergers and closures at the end and beginning of the year, the number is expected to approach or exceed the 221 branches closed last year.

Looking at each bank, Shinhan Bank reduced 60 branches from 784 to 724, Kookmin Bank decreased by 58 from 914 to 856, Woori Bank by 54, and Hana Bank by 16.

Mergers and closures did not spare even core branches that were considered key locations due to high foot traffic and large capital demand. Kookmin Bank will close 40 branches in January next year, including Yangjae-dong, Bongeunsa Station, and Irwon Station branches in Gangnam-gu, Seoul. Shinhan Bank will close the Yongsan-gu Office branch in Seoul in January next year, and in February, the Incheon Airport New Town branch in Jung-gu, Incheon, will be merged into another branch. On the 7th, the Gimhae International Airport branch was merged into the Seobusan Distribution Complex Financial Center.

Non-face-to-face finance becoming mainstream... Banks say "to improve inefficiency"

A quiet bank branch in Seoul./Photo by Hyunmin Kim kimhyun81@

Financial authorities express concern that the rapid decrease in bank branches may cause side effects. This is because financial accessibility for vulnerable groups such as the elderly or disabled with physical difficulties may decline. In 2020, when the Financial Supervisory Service saw the rapid reduction of branches, former Governor Yoon Seok-heon stated, "It is not desirable for banks to drastically reduce branches in a short period," and ordered "to ensure thorough supervision." Since March last year, a more detailed ‘Joint Procedure on Bank Branch Closures’ has been implemented.

However, the general outlook in the financial sector is that the trend of branch reduction will continue. In an environment where non-face-to-face and digital finance have become mainstream, there is no reason to maintain branches that incur huge costs. According to the Bank of Korea, the number of internet banking registrations at 19 domestic banks last year was 190.86 million. Among them, mobile banking customers increased by 18.29 million to 153.37 million, accounting for 80% of the total. The proportion of fund transfer services via internet banking was 74.7%, while counter usage was only 5.8%.

There is also an explanation that the current mergers and closures of bank branches are measures to eliminate inefficiencies rather than to improve profitability. A bank official said, "According to regulations, it is difficult to close branches in areas with many vulnerable groups such as the elderly," adding, "There have been cases where branches planned for mergers and closures were maintained due to concerns about reduced accessibility for vulnerable groups." He also said, "Most cases involve merging branches or sub-branches that are redundantly located nearby."

To reduce side effects caused by branch reductions, the banking sector is introducing joint branches. In April, Hana Bank and Woori Bank opened a joint branch in Yongin, Gyeonggi Province, as a sub-branch concept. In September, Kookmin Bank and Shinhan Bank opened joint branches in two locations: Goeup in Yangju, Gyeonggi Province, and Yeongju, Gyeongsangbuk-do.

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