Banks defend branch closures as their customers move online

Australia’s big banks have defended a wave of branch closures across big cities and regional Australia, pointing to a sharp decline in over-the-counter transactions to argue that more of their customers prefer online banking.

Banks have been steadily closing branches since the 1990s, but COVID-19 forced the trend to gather pace, sparking criticism from regional communities and prompting a Senate inquiry on regional branch closures.

Banks, including CBA, experienced a sharp decline in over-the-counter transactions.Credit: Bloomberg

The Australian Prudential Regulation Authority (APRA) told the inquiry that, in the past five years, the number of bank branches dropped by 30 per cent, or more than 1000, in major cities, and 29 per cent in regional and remote areas.

The Senate inquiry has so far received 500 submissions on branch closures, many of them from local councils, businesses, and customers negatively affected by banks shutting their doors.

However, the banks have responded by arguing that more customers are shunning branches for their day-to-day banking needs as they also use less cash. They have also highlighted alternatives to bank branches, such as the partnership between banks and Australia Post.

Commonwealth Bank said it understood the concerns about branch closures, but in the five years before COVID-19 there was a 46 per cent decline in over-the-counter transactions in branches in cities, and a 42 per cent slide in regional and remote areas.

These trends “only accelerated” during the COVID-19 pandemic as more people switched to digital banking, it said.

“This preference for digital banking has resulted in a significant decline of customers who choose to make everyday banking transactions over the counter, which has been felt nationwide in both regional and metropolitan areas,” the bank’s submission said.

CBA has the nation’s largest branch network, with 744 branches at the start of March. In December 2019, CBA said it had 1134 branches.

National Australia Bank’s also highlighted the shift away from branches to online banking, saying 93 per cent of customer interactions occurred through digital channels.

It said over-the-counter transactions at NAB branches had fallen by 70 per cent since 2015.

“Significantly fewer customers are using branches for their banking needs, and in line with these changing customer preferences, we continue to adapt the way in which we serve our customers accordingly,” NAB said.

ABA boss Anna Bligh says digital transactions have become the preferred mode of banking for most Australians.Credit: Peter Rae

NAB stated in its submission that it had more than 500 branches and 118 business banking centres. In late 2019 before COVID-19, NAB had 892 outlets, including branches and business banking centres.

Australian Banking Association chief executive Anna Bligh said that across the industry, over-the-counter transactions had fallen 36 per cent since 2019, while digital banking had accelerated.

“As customers change the way they chose to interact with their banks, from in-person banking to digital and phone channels, their banks are following them,” Bligh said in a submission.

The ABA cited survey data showing least 80 per cent of Australians preferred digital or phone banking for tasks such as transferring money, paying bills, checking an account balance, or applying for a credit card limit increase.

It said there had been a 38.6 per cent decline in over-the-counter transactions in regional branches in the three years to 2022, citing data from ANZ Bank, CBA, NAB, Westpac, Bendigo and Adelaide Bank and Suncorp.

However, critics say branch closures affect certain parts of the community disproportionately.

Council on the Ageing (COTA) told the inquiry older people in rural and regional areas were “uniquely disadvantaged” by branch closures because they were often less mobile and lacked confidence in using digital alternatives to branches.

While the banks argue consumers can access in-person services through a partnership between post offices and more than 80 banks, COTA said this service was largely limited to the deposit and withdrawal of cash and monitoring account balances.

NAB said more than 93 per cent of the transactions done through its branches could be done through Bank@Post.

The Finance Sector Union argued banking should be declared an essential service, calling for regulation that would require all banks to have a minimum number of branches in rural and regional Australia.

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