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Indonesia to lead massive reduction of bank branches in SEA
Banks in the region will close a significant number of branches over the next 10 years as customers shift from physical to digital banking services, particularly in Indonesia.
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Full service: A customer (left) is served at a BCA branch on Jl. Sudirman in Yogyakarta in September 2020. (JP/Donny Fernando)
I
ndonesia is projected to lead a significant reduction of bank branches in Southeast Asia (SEA) over the coming 10 years as customers shift from physical to digital banking services, according to Roland Berger.
The Munich-based management consultancy estimates that the number of bank branches in SEA will shrink by 18 percent in the next decade. That figure is equivalent to some 11,000 branches being shut in the region, with almost 7,000 located in Indonesia.
Thailand and Malaysia will follow Indonesia, while Singapore and Brunei have already seen such a trend since 2010. By contrast, the number of branches is expected to continue growing in Vietnam, Laos, Cambodia and Myanmar given the underdeveloped banking sector in those countries.
“They [banks] need to address the upcoming challenges of the decline of the branch role sooner rather than later, preparing for a redesigned, repurposed and reduced network,” wrote Philippe Chassat, senior partner at Roland Berger and co-author of the study.
“Failing to do so will profoundly impact retail banks’ profitability, leaving oversized branch networks underutilized."
Read also: Indonesia sharpens legal framework for digital banking
Increased access to technology, a demographic shift in the banking customer base, significant overall economic uplift and supporting digital economy policies and government incentives are cited as driving the shift. The study estimates that more than two-thirds of banking customers will prefer digital banking services to physical branches.
