(Yicai Global) Nov. 20 -- As of yesterday, 2,672 Chinese bank branches had closed this year, per statistics from the China Banking and Insurance Regulatory Commission.

High costs that undercut profits plus the impact of online and mobile banking are the main causes of these closures, Securities Daily reported today, citing sector insiders.

“Most outlets that have shut have done so because it is difficult to turn a profit,” a banking insider said, noting branches see fewer visitors and generate less business volume as the banking business migrates online and branches' high operating costs mean income is insufficient to cover their expenses, so bank outlets are quickly drying up.

One cause of banks speeding up in closing inefficient branches is high operating costs, a staffer at a joint-stock bank in a third-tier city stated. “A sub-branch, for example, spends CNY5 million (USD759,820.5) to CNY10 million a year on such items as staff, business premises and office supplies,” the source added.

Banks are also shuttering outlets because they have been integrating their online and offline businesses in recent years.

Behavioral Changes

The booming fintech sector and profound changes in customer behaviors in recent years have greatly affected bank outlets’ functions and services, said Dong Ximiao, chief researcher with Merchants Union Consumer Finance Internet, and information technology provides great support for mobile banking and smart customer services, he added, noting consumer behavior is changing and more and more users now favor digital and mobile services, and outlets cannot meet customers’ demand for access to services anytime and anywhere.

“Banks have moved over 90 percent of their offline business online, such as online loans, investment and wealth management, transfers and remittances,” a joint-stock bank’s lobby manager told Yicai Global, noting customers rely on outlets less and less thanks to convenient, fast and multifunctional e-banking.

The rapid growth of mobile and online banking does not necessarily sound the death knell for conventional brick-and-mortar branches, however.

“Outlets hold special value for banks and customers,” Dong stated, adding, “They are banks’ basic distribution channels and service windows and are vital and irreplaceable for them to build up their images, sell complicated financial products, and manage relationships with high-end customers, especially for small and medium banks, as well as those in smaller cities. Outlets are a key prop for developing inclusive finance and supplying services to small and micro businesses, as well as the general public.”

Editor: Ben Armour, Xiao Yi