Bank Branches Decrease While Satellite Offices Rise... Why? [1mm Finance Talk]

Fewer Walk-in Customers Accelerate Branch Consolidation
Small-Scale Offices Replace Branches with 30-40% Lower Operating Costs
Cost-Cutting by Banks Increases Inconvenience for Financial Consumers

Over the past two years, the number of branches operated by the five major commercial banks in Korea (KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup) has decreased by 245, while the number of sub-branches has been rapidly increasing. Although banks claim these efforts are intended to maintain face-to-face channels, there are continued criticisms that cost-cutting measures by banks are still causing significant inconvenience for financial consumers.

According to the financial sector on August 25, the total number of branches (including sub-branches) operated nationwide by the five major banks in the first half of this year was 3,755, a decrease of 172 from the end of 2023 (3,927). Looking only at full branches, excluding sub-branches, the number fell from 3,272 to 3,027 during the same period, a reduction of 245 branches (7.49%). Despite the financial authorities announcing measures to strengthen the management of bank branch closures in 2023, these efforts were insufficient to prevent the decline in the number of branches operated by commercial banks.

According to the Financial Supervisory Service and the Korea Federation of Banks, the total number of domestic bank branches and sub-branches (as of year-end) has steadily decreased: 6,405 in 2020, 6,094 in 2021, 5,800 in 2022, 5,733 in 2023, and 5,625 in 2024.

Among the five major commercial banks, KB Kookmin Bank closed the most branches (excluding sub-branches). KB Kookmin Bank operated 703 branches nationwide at the end of 2023, but this number dropped to 620 in the first half of 2025, resulting in 83 closures in just two years. Shinhan Bank closed 70 branches during the same period, followed by Woori Bank (55 closures) and NH Nonghyup Bank (37 closures). Hana Bank maintained the same number of branches, with 533 at both the end of 2023 and the first half of 2025.

In contrast, the number of sub-branches is increasing. The five major banks operated 654 sub-branches at the end of 2023, which rose to 728 in the first half of this year-an increase of 74 (11.31%) in two years. KB Kookmin Bank also saw the largest increase in sub-branches, from 94 to 153, adding 59 locations during this period. As KB Kookmin Bank reduced the most branches, it appears to have filled service gaps by expanding sub-branch operations. Hana Bank added 10 sub-branches, Woori Bank 3, and both Shinhan Bank and NH Nonghyup Bank each added one.

The main reason for the reduction in full branches and the increase in sub-branches among commercial banks is 'cost reduction.' With a significant increase in customers using non-face-to-face transactions such as mobile banking compared to the past, it is more efficient for banks to operate sub-branches rather than full branches. In fact, operating a single branch costs hundreds of millions of won annually, including labor costs, rent, maintenance, and security expenses. In contrast, sub-branches require only about one-third of the staff and handle a limited range of work, making them 30-40% cheaper to operate than full branches.

An official from a commercial bank said, "With the increase in non-face-to-face transactions, branches with fewer walk-in customers are being merged or consolidated with nearby branches to minimize customer inconvenience and improve operational efficiency."

Banks argue that operating sub-branches allows them to maintain face-to-face channels, but from the perspective of financial consumers, inconvenience remains inevitable. Sub-branches are simplified versions of branches that mainly handle personal finance, making professional financial consultation impossible and preventing individual business owners from accessing corporate financial services. Some sub-branches operate as 'digital sub-branches,' which creates even greater difficulties for elderly customers.

Previously, the financial authorities introduced the 'Measures to Strengthen the Management of Bank Branch Closures' in 2023, but there are criticisms that these measures are insufficient to curb the trend of branch closures among commercial banks. The measures include: conducting a pre-closure impact assessment, establishing procedures to gather opinions from local residents, and preparing safeguards such as installing alternative branches or ATMs. However, from the banks' perspective, cost reduction is the top priority, so the financial authorities' measures are criticized as being little more than a formality.

An official from a commercial bank said, "As we proceed with mergers and consolidations, we are trying to absorb as much local customer demand as possible through hub branches. At the same time, as the transition to non-face-to-face banking accelerates, we are also providing digital financial education services for customers who may be left behind by digital transformation (DX), to ensure that customers do not experience inconvenience."