The increasing adoption of fintech has led to a decline in the number of bricks-and-mortar outlets operated by leading bank in China.
On 9 May the China Banking and Insurance Regulatory Commission (CBIRC) announced the approval of the closure of 10 bank branches and sub-offices, for the closure of well over 800 bank outlets since the start of 2020.
Licensing data from CBIRC indicates that from the period from 1 January to 4 May 2020 a total of 683 bank branches (支行) closed, while 118 sub-offices (分理处) also shut, bringing the total number of outlets that became defunct during the period to 801 in total.
This rate of closures marks a sharp acceleration even compared to 2019, when the big six state-owned banks closed 836 of their physical outlets, with Agricultural Bank of China shutting 232 and ICBC 220.
Data from the China Banking Association (中国银行业协会) in 2019 the average off-counter operations rate for banking sector financial institutions was 89.77% as compared to 88.67% in 2018 and just 63.23% in 2013.
A research report from Lianxun Securities further indicates that interest rate market reforms have led to a sharp drop in overall profits within a brief period, ramping up competition within the Chinese banking sector.
Given the exorbitant cost of bricks-and-mortar outlets due to rent, staffing expenses and hardware and equipment maintenance, this profit drop has prompted many banks to reduce their numbers of premises.
“The reduction in physical outlets of banks has already become the general trend,” said one executive at a municipal commercial bank to 21st Century Business Herald.
“It’s not just a reduction in outlets – the operating floorspace of a single outlet has also declined – the large premises of the past have already become difficult to achieve.
“We estimate that in a big city deposits of 100 million yuan are the break-even point, yet now with interest rate spreads further narrowing it’s probably not even this.”