The demise of branch banking – Technology, consolidation, bank fragility

By Jan Keil, Steven Ongena
Journal of Banking & Finance | January 2024

DOI

doi.org/10.1016/j.jbankfin.2023.107038

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Citation

Keil, Jan., Ongena, Steven. The demise of branch banking – Technology, consolidation, bank fragility Journal of Banking & Finance doi.org/10.1016/j.jbankfin.2023.107038.

Journal of Banking & Finance, 2024

Abstract

We study bank branching dynamics across 3,143 US counties and 26 years. During the last decade, banks closed their branches at an unprecedented rate. At its peak in 2009, there were 90,783 branches. By 2020, this number has fallen by 12 percent. While technological factors correlate with these branching dynamics, bank fragility and consolidation are also strongly associated with changes in the number of branches (and their openings and closures). Interestingly, technological capabilities to service customers, such as online banking, seem less tightly linked to de-branching than technological capabilities to process internal information. Our analysis shows that large banks rely on internal technology to shed branches, while small banks close branches when they are vulnerable or consolidate.

Jan Keil is an Assistant Professor of Finance at the Indian School of Business (ISB). His research focuses on disruptive and technology-driven change in financial intermediation, including payments, banking, consumer finance, and money. One current project explores the geopolitical motivations behind central bank digital currencies and their effect on payment firms (revised and resubmitted to the Journal of Finance). Another project analyses the economics of buy-now-pay-later (BNPL) for e-commerce merchants (revised and resubmitted to the Journal of Financial Economics).

Professor Keil has published in the Journal of Financial and Quantitative Analysis and served as a referee for the Review of Financial Studies. He has worked with Manju Puri, Tobias Berg, Thorsten Beck, and Steven Ongena.

He has received research grants from the German National Science Foundation (DFG) and the University of Zurich. Prior to joining ISB, he was affiliated with Humboldt University in Berlin and the University of the West Indies in Kingston, Jamaica. Professor Keil holds a PhD in Economics from the New School for Social Research, New York, and an MA-equivalent diploma in Political Science from Goethe University, Frankfurt.

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