2000 Bank Branches Disappeared... Pushed by Apps and Leaving Through Voluntary Retirement

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The number of bank branches in South Korea has hit a record low since related statistics began to be compiled. As digitalization in finance increases, non-face-to-face transactions have grown, leading banks to continuously reduce the number of branches and employees. Concerns are rising that the disappearance of offline branches will increase difficulties in accessing financial services for vulnerable groups who are less adept at digital technology.

According to the Financial Supervisory Service and the Bank of Korea on the 16th, the total number of bank branches nationwide stood at 5,792 at the end of last year, the lowest since the statistics were first released in 2001. The number of bank branches nationwide peaked at 7,836 in 2012, then declined to 6,234 in 2021, 5,948 in 2022, and 5,896 in 2023, showing a downward trend. This means a total of 2,044 branches have disappeared from 2012 to last year.

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Banks have recently been downsizing by closing or merging branches as the number of customers using mobile applications and the proportion of non-face-to-face transactions have increased. KB Kookmin Bank closed 28 branches last month, and Shinhan Bank also shut down 28 branches in January. Woori Bank and NH Nonghyup Bank plan to reduce branches this year as well. A representative from a commercial bank said, "Most banking services such as deposits, withdrawals, and loans can now be handled via mobile apps or the internet, so reducing offline branches is an inevitable situation."

As bank branches disappear, the number of bank employees has also decreased. The total number of bank employees, which was 127,593 in 2012, dropped by 13,711 to 113,882 last year. Major commercial banks such as Shinhan Bank, Nonghyup Bank, Kookmin Bank, and Hana Bank have continued voluntary retirements this year. It is expected that more than 2,000 employees from the five major commercial banks alone will leave this year.

Illustration by Youngwoo Lee 20wo@

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While the digitalization of finance and branch closures for profitability may be rational decisions, there are criticisms that this limits financial accessibility for consumers who find it difficult to use smartphones, such as the elderly.

According to the Korea Institute of Finance, among the top 30 regions where the travel distance to use bank branches exceeds 20 km, 26 are ultra-aged areas with over 20% of the population aged 65 or older. The elderly have a low usage rate of bank apps, and with the disappearance of bank branches, access to financial services is further deteriorating.

To address these issues, the government recently announced measures to activate bank agency systems, joint ATMs among banks, and deposit/withdrawal services at convenience stores. This aims to provide alternative means for face-to-face handling of core banking services such as deposits and loans as bank branches disappear. The government plans to start a pilot operation of the bank agency system within the year through the designation of innovative services in July.

However, there are clear limitations to government policies, and voices call for more fundamental solutions. Lee Si-yeon, a research fellow at the Korea Institute of Finance, said, "It will be difficult for bank agents to fully guarantee the same quality and scope of services that bank branches provided," adding, "The presence of institutions capable of agency services, such as post offices, may even accelerate the closure of bank branches in the region."

She continued, "Considering the limitations in the homogeneity of accessible services when outsourcing banking tasks to other institutions, it is necessary to more closely evaluate changes and alternatives in financial institutions available when branches close and to review alternatives from an integrated perspective."

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