No. of bank branches shrinks 20% since pandemic, but agency banking pilot stalls

A notice is posted at one of Woori Bank’s branches in central Seoul's Jongno District, informing customers of its closure due to a merger with a nearby branch, Feb. 10. Yonhap

The total number of bank branches nationwide has fallen by nearly 20 percent since the COVID-19 pandemic, while the government’s pilot project for bank agency services, designed to improve consumer financial access, has made little headway, according to an opposition lawmaker Sunday.

Rep. Choo Kyung-ho of the People Power Party cited data from the Korea Federation of Banks showing that domestic banks operated 5,654 branches at the end of 2019, but the figure dropped to 4,572 by the end of this July, a decline of 19.1 percent over five years and seven months.

Branch closures occurred every year and across all regions during the period. Daegu saw the sharpest contraction, with its branch count falling 23.6 percent from 292 to 223, followed by Seoul, which recorded a 22.6 percent decline from 1,864 to 1,443.

Banks have been shutting down or consolidating offline branches to streamline operations amid the growing digitalization of financial services.

To prevent financial exclusion, particularly for older adults and people in less accessible regions, the Financial Services Commission (FSC), the country’s top financial regulator, tightened rules in 2023 by requiring more rigorous pre-closure impact assessments and expanded disclosure of related information.

In addition, the FSC unveiled plans in March to launch bank agency services that would allow customers to conduct transactions such as opening deposit accounts or applying for loans at institutions such as post offices and savings banks.

The regulator initially planned to designate the services as an innovative financial program in July and pilot test them before revising the Banking Act, but little progress has been made so far.

An FSC official attributed the delay to the wide range of issues requiring coordination.

“Discussions are still ongoing among post offices, savings banks, mutual finance institutions and banks,” the official said.

Rep. Choo argued that the continued decline in the number of bank branches is worsening financial accessibility for vulnerable customers.

“The recognition of bank agency services as an innovative financial program and the related legal revisions need to be expedited,” he said.