The Demise of Branch Banking Technology, Consolidation, Bank Fragility

56 Pages Posted: 30 Sep 2020 Last revised: 8 Jun 2021

See all articles by Jan Keil

Jan Keil

Humboldt University of Berlin

Steven Ongena

University of Zurich - Department of Banking and Finance; Swiss Finance Institute; KU Leuven; NTNU Business School; Centre for Economic Policy Research (CEPR)

Date Written: September 29, 2020

Abstract

Banks are closing branches at an unprecedented rate. In various countries up to four out of five branches have been closed, while in the US over 11,000 branches representing eleven percent of its peak stock in 2009 have been closed so far. To differentiate between various explanations for this fundamental transformation, we comprehensively study branching dynamics across 36 OECD countries, 2,744 US counties, and 84,494 US branches over up to 26 years. While technological factors explain some of the change in branch numbers across countries, counties, and individual banks, bank fragility and consolidation surprisingly determine an even larger component of branching dynamics. Interestingly, online banking capabilities play a less important role than internal processing technology. While large banks rely on technology to shed branches, small banks close branches when fragile or consolidating. No single factor by itself offers a universal explanation for the secular de-branching of banks.

Keywords: branches  banking  technology  bank health  mergers

JEL Classification: G21

Suggested Citation

Keil, Jan and Ongena, Steven R. G., The Demise of Branch Banking Technology, Consolidation, Bank Fragility (September 29, 2020). Swiss Finance Institute Research Paper No. 20-83, Available at SSRN: https://ssrn.com/abstract=3701638 or http://dx.doi.org/10.2139/ssrn.3701638

Jan Keil

Humboldt University of Berlin ( email )

Dorotheenstrasse 1
Berlin, 10099
Germany

HOME PAGE: http://www.jankeil.com

Steven R. G. Ongena (Contact Author)

University of Zurich - Department of Banking and Finance ( email )

Schönberggasse 1
Zürich, 8001
Switzerland

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

KU Leuven ( email )

Oude Markt 13
Leuven, Vlaams-Brabant 3000
Belgium

NTNU Business School ( email )

Norway

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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