Every second bank branch will be eliminated by 2030. However, this is not only due to digitization for a long time.

Customers stand at ATMs to withdraw cash - and use the service in bank branches less and less.

DThe death of bank branches will accelerate in the coming years. Oliver Wyman’s consultants estimate that by 2030 German banks and savings banks will close almost every second branch. If there are currently 29,700 branches, after the next decade there will probably only be 15,800, as can be seen from an Oliver Wyman study that is exclusively available to the FAZ.

In 2008, the German banking industry still had 41,700 branches, five years later it was only 38,200. A further 8,500 branches have ceased to exist since 2013. For René Fischer, partner at Oliver Wyman and one of the authors of the study, the numbers sound alarming at first. But they are the logical consequence of increasing digitization as well as cost and consolidation pressure.

With 3.6 bank branches per 10,000 inhabitants, Germany is currently one of the countries with the highest branch density in Europe. According to Oliver Wyman, the lowest branch density is found in the northern European countries Sweden, Finland, Denmark, the Baltic States, Great Britain and Ireland. There are on average fewer than two branches per 10,000 inhabitants.

One outlier is France, which is almost completely controlled by the big banks BNP Paribas, Société Générale, Credit Agricole and Groupe BPCE. Despite the high concentration of banks, there are still 5.6 branches per 10,000 inhabitants, which is a top figure in Europe. But that is also due to the low population density in France. There live an average of 122 people on one square kilometer, while in Germany there are almost twice as many with 232.

“It’s not just digitization that leads to branch closures,” says Fischer in an interview with the FAZ. Other important causes are consolidation and the pressure on income due to low interest rates. In February 2018, Oliver Wyman caused a stir with a study on bank deaths in Germany.

Not a discontinued model

The consultants estimated that only 150 to 300 institutes will remain in Germany by 2030. At the end of 2018 there were 1783 banks and savings banks. “Due to the long period of low interest rates and an increasing wave of consolidation, banks are under massive pressure,” says Fischer. According to him, banks are typically thinning the branch networks in consolidations due to overlapping or synergy and economies of scale.

When Deutsche Bank and Commerzbank finally examined a merger with no results this spring, the focus was on the high number of employees and branches. Since both institutes are represented at similar locations, a joint bank could have done without a large part of the branches and the employees employed there.

In addition, the German banks and savings banks are under pressure from the financial supervisory authority to finally improve their cost situation. The President of the German financial regulator Bafin, Felix Hufeld, for example, regularly points this out. However, Fischer warns against rushing to close branches.

Despite the wave of closures, these are not being phased out. “Personal advice will continue to be necessary in the relationship between customer and bank. This is especially true for complex issues such as real estate financing, ”he says. It is true that bank customers would like to be able to process more financial services increasingly via digital channels in the future.

There is a risk of losing customers

Nevertheless, the majority of the population in the branch will continue to recognize an elementary component in the relationship with a bank in the future. Around 60 percent of all customers assumed that they would visit the branch for personal advice just as often or even more frequently in three to five years. At the same time, 40 percent are considering changing their bank if their main branch closes.

According to Oliver Wyman, this will put around 6 billion euros at risk by 2025 and around 8 billion euros in customer revenue by 2030. “The banks have to learn which customers they meet at which contact points,” advises Fischer. If branches are closed, it must be ensured that customers can switch to digital offers.

Otherwise, branch closings lead to fewer customers. For digitally inactive customers, the churn in the course of branch closings is 15 percent, for digitally active customers, however, only a few percentage points to less than 2 percent. Fischer recommends that banks concentrate on value-adding advisory activities on site.

According to him, additional offers in the branches, such as the cafe bar, do not help. “They only cost time and money.” It is possible that the classic bank branch will increasingly be converted into a consulting center in the future.