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| People wait to use automated teller machines in Seoul, March 2022. Newsis |
By Lee Yeon-woo
The number of bank branches continues to fall as lenders increasingly focus on online financial services. The trend has raised concerns for digitally vulnerable people such as senior citizens whose accessibility to banking services may be hindered. It also could lead to unexpected blind spots.
According to the Financial Statistics Information System at the Financial Supervisory Service (FSS), 17 banks, including commercial, local, and specialized banks, operate 5,855 branches as of last September, which is 340 less than a year ago. The figure has been on a downward trajectory since 2015, but the pace of the decrease has accelerated amid the COVID-led social quarantine policy. Banks have closed down some 1,300 offices over a seven-year period.
The reduction in the number of bank offices is a global industry trend. But the phenomenon seems to be more drastic in Korea which already has a below-average number of offices compared to global peers.
According to the report by the Financial Economy Institute (FEI), Korea has 14.4 bank branches for every 100,000 adults, which is far below 33.2 of France, Japan's 33.9, and 29.7 in the United States. The average of OECD member countries is 18.3.
"The vulnerable class lacks digital information capacity compared to the ordinary public. Even though they can use the internet, their scope of use is not wide enough to include the full use of financial transactions or e-commerce … The imbalance in financial services can be widened," the report notes.
They are also vulnerable to new types of financial fraud, such as fooling customers into giving their personal information via phones or fake bank websites.
Experts also point out that the shutdown of offline branches can also have negative effects on the local economy. A one percent increase in the number of bank branches pulls up the gross regional domestic product (GRDP) by 0.31 percent, according to the report.
"As banks downsize, they try to improve their return on equity (ROE) mostly by reducing the number of bank branches ― even though it can hinder accessibility for the financially vulnerable ― and cut off the costs incurred by employment," FSS Governor Lee Bok-hyun told reporters last week.
As it has emerged as a social issue, the FSS chief reported to the National Assembly on Tuesday that the watchdog will induce banks to strengthen accessibility for financially disadvantaged groups and closely monitor the reduction of bank branches.
Amid growing complaints, banks are also trying to adjust the pace of offline shutdowns. Four major commercial banks here, KB Kookmin, Shinhan, Woori, and Hana Banks, will close 77 bank offices until the first quarter of this year as planned, but said they will take a prudent approach in future reductions.
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