The banking sector is reducing "branches" while increasing "offices." Although financial authorities have strengthened procedures for closing outlets, they cannot ignore the realistic situation where staff numbers are declining and management costs are rising. Along with calls to make regulations on outlet closures more realistic, opinions are also being raised that accessibility to non-face-to-face financial services must be improved.
According to the Korea Federation of Banks on the 12th, the number of outlets for 16 domestic banks at the end of the second quarter this year was 5,505, an increase of two from the end of last year. However, a closer look reveals that branches decreased from 4,547 to 4,482, a drop of 65. In contrast, offices increased from 956 to 1,023, a rise of 67. While the total number of outlets has increased, in reality, offices have filled the gap left by the reduction in branches.
There is a significant difference in operational scale between branches and offices. The average staff size for banking sector offices is about four people, one-third of the branch average of 13. Annual operating costs for offices are reportedly around 1 billion won, approximately 30% of those for branches. In terms of operations, while branches can handle most tasks including corporate finance, offices perform limited tasks focused on individual customers.
Banks are converting branches to offices rather than closing them because financial authorities have strengthened regulations related to outlet closure procedures. The financial authorities released the "Plan for Strengthening Bank Outlet Closures" in April 2023, followed by the "Bank Outlet Closure Response Plan for Improving Financial Accessibility" in February this year, which was implemented starting in March.
In particular, this year's outlet closure response plan strengthened procedures to ensure that local residents' opinions are reflected substantively. Previously, banks could relatively autonomously determine the format of the local opinion solicitation procedure. Starting this year, they must collect local opinions for at least one month, or at least two months if there is no bank branch within 10 kilometers. They must utilize at least two methods such as text messages, mail, and outlet notices, and also establish channels where opinions can be submitted freely.
However, in cases where a branch is converted to an office, there are no separate regulations. For banks, this becomes an option to reduce staff and operating costs while maintaining some of the original branch's functions and face-to-face contact points.
A senior banking official stated, "Even within Seoul, if you visit outlying branches in areas such as Gwanak-gu or Eunpyeong-gu, there are only a few elderly customers who still want to deposit money at the counter even though it can be done via ATM." He added, "Nevertheless, local residents who participated in the preliminary impact assessment insist that branches should not be eliminated, making closures difficult. As a result, many cases involve downsizing to offices."
Behind the inevitable reduction of bank branches is also a decline in workforce. The number of employees at five major banks decreased by 990 from 71,431 at the end of March last year to 70,441 at the end of March this year. As banking operations rapidly shift to non-face-to-face channels such as mobile and internet banking, the trend is for fewer staff to be assigned to face-to-face sales offices.
In this situation, the banking sector complains that outlet closure regulations reflect consumer interests too much. A prime example is viewing the proportion of customers using outlets who are not enrolled in non-face-to-face services as a key indicator for judging the impact of outlet closures. This means banks are forced to bear the choices of financial consumers who refuse non-face-to-face services.
However, voices are also being raised that the banking sector must simultaneously work to improve accessibility to non-face-to-face financial services. In particular, there is a need to improve the UI/UX of mobile apps so that customers unfamiliar with digital finance, such as the elderly, can conduct complex financial transactions without visiting an outlet. The financial authorities' initial plan for outlet closures also included measures such as establishing an elderly mode within apps and expanding consumer education.
in FINANCE
