The Demise of Branch Banking Technology Consolidation, Bank Fragility

69 Pages Posted: 30 Sep 2020 Last revised: 9 Oct 2021

See all articles by Jan Keil

Jan Keil

Humboldt University of Berlin

Steven Ongena

University of Zurich - Department of Banking and Finance; NTNU Business School; Swiss Finance Institute; KU Leuven; 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 o 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 34 OECD countries and 84,494 US branches over up to 26 years. While technological factors correlate with the change in branch numbers across countries and the opening and closing of branches, bank fragility and consolidation are surprisingly at least as robustly associated with branching dynamics. Interestingly, online banking capabilities seem to play a less important role than internal processing technology. General bank level factors are more important than local internet access. Bank internal use of technology appears to be more relevant than use of technology by competitors. While large banks rely on technology to shed branches, small banks close branches when fragile or consolidating.

Keywords: branches, banking, technology, bank health, mergers

JEL Classification: G21

Suggested Citation

Keil, Jan and Ongena, Steven R. G. 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

NTNU Business School ( email )

Norway

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

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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