(Yicai) Dec. 9 -- China has nearly doubled the pace of small bank mergers and closures this year as fiercer competition and the rapid spread of financial technology upend the banking sector.

A total of 377 small lenders have merged or shut down so far in 2025, up from 195 for the whole of last year, according to statistics from financial information platform Qiye Yujingtong. In addition, more than 9,000 brick-and-mortar bank branches have closed.

Some 218 were village banks, with many combining to form bigger lenders, including Bank of Tangshan’s absorption of Qian'an Xianglong Rural Commercial Bank in Hebei province on Nov. 28. Another 79 were rural commercial banks and 70 were rural credit cooperatives.

The place with the most closures was Inner Mongolia Autonomous Region, where 139 small banks were deregistered, the most among China's provincial-level regions. This resulted from a sweeping consolidation of its rural credit system. Inner Mongolia Rural Commercial Bank, set up on May 17, pulled together 120 rural credit cooperatives and village banks. 

More than 20 lenders deregistered in each of Sichuan, Shandong, and Henan provinces.

The driving force behind these closures is risk mitigation. The country has 357 lenders at high risk, mainly rural cooperative and village banks, according to the 2024 China Financial Stability Report. 

At least 11 provincial-level regions have approved the creation of regional rural commercial or joint-stock banks, consolidating numerous small and medium-sized banks under unified legal entities to reduce systemic risk.

In addition to the dwindling number of smaller banks, approved branch closures have topped 9,661 this year as of yesterday, more than three times last year’s tally, according to the National Administration of Financial Regulation’s financial license query system. That includes 5,400 run by rural commercial banks and 962 run by state-owned banks, while the figure for city commercial and joint-stock banks is relatively small.

Fintech is shaking up how people use banks. “From transfers and bill payments to buying financial products or applying for loans, more than 80 percent of everyday banking can now be done via mobile or online,” the tech chief at a lender in South China told Yicai. “Naturally, the demand for physical branches has dropped sharply.”

The annual cost of running a typical branch, including rent, utilities, and maintenance, can be CNY2 million to CNY5 million (USD282,800 to USD707,000), and with a dozen staff members the total cost might approach CNY10 million, the person said, noting that the cost of doing business online is about only one-10th of that.

Branch closures do not necessarily undermine service delivery, industry insiders told Yicai, saying they serve to address the excessive number and low operational efficiency in some regions.

Editors: Tang Shihua, Martin Kadiev