When the Bank Comes to You: Branch Network and Customer Omnichannel Banking Behavior

TLDR

Banks are increasingly shrinking their physical footprints and pushing customers toward digital channels, yet the impact of this shift remains underexplored. The study examines how changes in a bank’s branch network—specifically openings and closures—affect customers’ use of multiple banking channels. Using proprietary data from a large U.S. commercial bank, the authors analyze the asymmetric effects of branch openings and closures on omnichannel banking behavior.

Abstract

Banks today have been increasingly reducing their physical presence and redirecting customers to digital channels, and yet, the consequences of this strategy are not well studied. This research investigates the effects of banks’ branch network changes (i.e., branch openings and branch closures) on customer omnichannel banking behavior. Using a proprietary data set from a large commercial bank in the United States, this paper shows the asymmetric effects of branch openings and branch closures on customer omnichannel banking behavior. In particular, it finds that branch openings increase customers’ branch transactions. However, the first branch opening leads to a migration of complex transactions to the branches, which might result in a net decrease in online banking in the short term. As consumers interact more with the physical channel, there is a gradual synergistic increase in customers’ transactions via online banking as well as alternative channels due to a learning spillover effect. This learning spillover effect goes from easy online inquiries to more complex online transactions as additional branches open. On the contrary, branch closures result in a favorable migration pattern from the branch channel to online banking. This pattern, however, could be reversed once the last branch closes within the customer’s residential neighborhood.