Why are so many branches closing?

The closure is so rapid that warnings have been raised about the potential impact on members of the community who rely on branch offices as an essential service.

The Combined Pensioners and Superannuants Association of NSW told a Treasury Department review in late 2021 that older people, including those living alone and unable to access younger family members or friends, are at risk of branch closures. “Although digitization of banking services is being rapidly adopted by Australians, digital capability is declining with age,” it said.

“We’ve certainly seen the fastest rate of store closures since we saw these changes in the 1990s.”

FSU National Secretary Julia Angrisano

FSU’s Angrisano acknowledges that customer habits are changing but says there are forgotten groups who may miss access to a bank if their local branch closes, including those from non-English speaking backgrounds or those with poor internet access. “The problem here is that every Australian should have access to banking services,” she says.

The banks’ own disclosures support the FSU’s figures, which show more than 650 closures among the big four.

Westpac’s investor materials show that the number of its stores has fallen by more than 200 over the past three fiscal years to 732 as of September 30th. National Australia Bank’s investor materials say its branches and business centers have fallen by 178 to 714 over the past three years The Commonwealth Bank’s annual report shows that its Australian branches have fallen by more than 200 to 807 in the three years to June 30 have declined.

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The ANZ told a parliamentary committee that its total number of branches fell by 145 to 425 between 2020 and the end of last year. Another 10 branches were closed in 2022.

Banks claim they are responding to shifts in demand patterns while trying to be more efficient.

Westpac’s consumer and commercial bank chief executive Chris de Bruin said in September that merging branches — or “co-locations” — allows the lender to stay in communities. But he also signaled that the number of branches would continue to fall, citing the bank’s presence on George Street in Sydney as an example.

“We currently have seven branches between Circular Quay and Town Hall. The question is, if they’re not used for the service, do I need them all? And that’s a question we’re going to ask,” he said. “We’re scaling to fit the capacity needed to do what customers want to do in the stores.”

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An ANZ spokeswoman also pointed to changes in customer behavior, saying that the lender has seen its in-store transactions fall by more than 50 percent over the past four years. She said only eight percent of the bank’s customers rely solely on branches for their day-to-day banking needs.

Angrisano says it’s “a bit disingenuous” to suggest banks only respond to customer trends — because banks have encouraged their customers to adopt digital banking, including through goals for employees. According to Angrisano, branch closures shouldn’t just be seen as a commercial issue as banks also have a “social license”.

But given the rapid growth in digital banking, while branch visits continue to decline and lenders scramble to cut costs, there’s little sign of a reversal in the decline in bank branch count. Barrenjoey analyst Jonathan Mott has reported that it costs about $1 million a year to run a bank branch on average, and he predicted lenders would continue to streamline their networks.

Ultimately, bankers say their challenge is to serve a broad group of customers – some of whom visit branches, but many don’t.

While critics argue that banks are closing branches to cut costs, Blockley says they are making significant financial investments in digital channels and customers are ultimately voting with their feet.

“There’s no point in occupying an empty building if no one comes through the door. Banking at the post office is probably the future in remote areas. The idea that every major bank will have a branch in every country town is long gone.”

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