Junio 29, 2021 (The Korea Times) Industry sources say the shuttering of branch offices will increase in the coming years, as the pandemic-induced growth of online transactions results in a digital paradigm shift in the banking sector
The nation's four major commercial lenders ― KB, Shinhan, Hana and Woori ― plan to close 159 branches this year alone. The plan has already been confirmed, and chances are they will increase the number if profitability worsens at other "offline" branches in the latter half of the year.
KB Kookmin Bank tops the list as it plans to close 50 branches by the end of the year, followed by Shinhan Bank with 46, and Hana Bank and Woori Bank that are also set to shutter outlets by 28 and 35, respectively.
Industry sources say banks have no choice in order to increase profitability and focus more on expanding their presence in the digital banking sector.
"More than half of all employees at banks are working at their branch offices, but most of them will be rotated to newly-established, digital-related divisions in the foreseeable future," a banking industry source said.
"Fewer people visit branches as mobile banking platforms replace the latters' traditional work at a rapid pace. To state it bluntly, banks will be less and less likely to hire conventional bank clerks amid the digital paradigm shift. Banks also want to slash their workforce by expanding voluntary retirement programs."
Another official from the industry said more bank clerks will be left with the dilemma over whether to extend their careers at the wholly-new, digital divisions.
"The days are gone when bank clerks wanted a lifetime job at a single company, so more young people in their late 30s and early 40s will consider voluntary retirement seriously as they seek new careers at other firms," the official said.
Data from the Korea Federation of Banks showed that the number of employees at the major banks is on a rapid decline. The number of staff from the aforementioned four lenders, as well as Standard Chartered Bank Korea and Citibank Korea, came in at 66,317 as of the end of March this year, down 1,244 from the end of 2020.
The quarterly drop is already close to a full-year decline of 1,570 seen in 2020, according to data from the federation. The number of bank branches is also declining sharply. The six lenders ran a total of 3,515 offices as of the end of the first quarter, down 31 from the end of 2020. The number rose to 3,834 at the end of 2018, but has dropped by around 300 in less than three years.
The Financial Services Commission (FSC) is holding internal discussions to ensure that a certain number of bank branches remain open so that the elderly, many of whom are not as digitally-savvy as younger Koreans, will not be forced to travel long distances to find one.
The overseer aims to slow down the trend by urging banks to check in advance how many customers will have difficulty conducting financial transactions if these branches are shut down in particular areas.
The FSC is also considering introducing a series of state-run financial education programs for the elderly, so they can make financial transactions using their smartphones.
"We are holding internal discussions before taking specific action," an official from the FSC said. "Digital banking is an inevitable trend, while at the same, protecting those in the grey area is also a crucial task. But nothing specific has been fixed for now. We will keep working with banks to minimize the impact on consumers."
Last month, FSC Vice Chairman Doh Kyu-sang also underscored the need for watchdogs to enhance their financial education programs for the elderly due to the rapid rise of digitization and online transactions.