Deutsche Bank: Branch closures create a vicious circle

Deutsche Bank: Branch closures create a vicious circle

Research from Deutsche Bank suggests that the more branches that banks close the sharper the fall in footprint at remaining outlets, as consumers turn to online services in frustration at the time spent traveling to a bricks and mortar location.

Within Germany, the number of bank branches has declined sharply from around 40,000 in 2007 to some 28,000 in 2018.

Deutsche Bank has drawn from a proprietary dataset on the share of clients who visit their local branch for an appointment at least once per year, to search for meaningful regional differences in customer behaviour.

The bank found that proximity to the nearest bank branch may explain why Germans visit branches at a lower frequency in remote, less populated areas. In the East, customers on average need to travel 13 km to the next bank branch compared to nine km in the West. As a result just 25% of clients in the East ever set foot in a bank, compared to 40% in the West.

Interestingly, however, in the largest cities such as Berlin, Hamburg, Munich or Frankfurt, where distance is not such an issue, clients visit branches less often, probably due to a younger and hence more tech-savvy population.

"While greater distance tends to dampen bank branch visits, it probably increases the use of online alternatives in Germany," the research concludes. "This also opens up the possibility of a vicious circle of branch closures leading to fewer visits which again lead to more branch closures."

Comments: (4)

David Gyori
David Gyori - BANKING REPORTS, LONDON - London 02 October, 2019, 10:13Be the first to give this comment the thumbs up 0 likes

Network effect in reverse gears.

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 02 October, 2019, 18:401 like 1 like

Vicious circle is not a bad thing. Otherwise, I can't imagine the crowds - and degradation in CX - if customers from a closed branch visit the nearest open branch. 

A Finextra member
A Finextra member 03 October, 2019, 08:001 like 1 like 28000 branches for 82 million Germans is 20 times more than in Sweden with 10 mill population snd 1400 branches in by size 30% larger territory and thus longer distances to nearest branch. Seems a lof for s miodern country like Germany, excellent datacomm infra, extensive smartphone holding, well educated population... who pays for the overinvestment in branches- customers or bank shareholders?
Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 03 October, 2019, 13:37Be the first to give this comment the thumbs up 0 likes

Obviously the bank pays for overinvestment in branches. Just like it pays for private jet used by its CEO and other expenses. 

Unless a bank levies an explicit charge towards "overinvestment in branches", the question of who pays for branches is moot. If and when it does, it will be obvious who pays for it - it's whoever the bill is addressed to.

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