Banks expand specialized branches to serve diverse needs

[Photo by Yonhap]

South Korean banks are expanding and diversifying the use of smaller branches tailored to specific audiences and purposes, such as 0, seniors, and traditional markets, while continuing to reduce the number of their official branches in response to demographic changes and cost-cutting efforts.

According to the four major Korean commercial banks—KB Kookmin Bank, Shinhan Bank, Hana Bank, and Woori Bank—KB Kookmin Bank had 94 small branch offices as of the end of 2023, an increase of 16 from the previous year. During the same period, Hana Bank increased its small offices by 4 to a total of 66, and Woori Bank increased by 7 to 96. The number of small offices for the three banks decreased at the end of 2022 compared to the previous year but increased again in 2023. Shinhan Bank had the most branch offices among the four banks, with 112 at the end of 2023.

Traditionally, these smaller branch offices were perceived by consumers as small-scale operations, with banks often running them primarily for cost savings without assigning any special functions. Recently, however, banks have been enhancing the roles of these branch offices and turned them into specialized business outlets. Some banks are using these spaces as testing grounds for new financial products and services.

Hana Bank is rebranding its branches and redefining their roles and functions. One of the first steps is to rename a branch near industrial complexes as a “business center” and transform it into a specialized corporate finance branch. Hana Bank plans to pilot this branch before deciding whether to expand the rebranding approach to approximately 60 branches.

Shinhan Bank has introduced digital branch offices in northern Seoul and Samcheok on the east coast. These digital branch offices are equipped with devices for handling most transactions via online video interactions. Woori Bank has converted some of its branch offices into “Senior Plus” branch offices targeting the elderly, while KB Kookmin Bank introduced “co-branch offices” that provide financial services in shared spaces with other banks.

While maintaining a large number of high-cost branches is inefficient amid as the number of online financial transactions increase, banks cannot simply close offline branches due to seniors who are not familiar with smartphones and depend on these services. The smaller branch offices serve as an intermediary between branch visits and non-face-to-face transactions.

Meanwhile, Techfin Ratings Co., a corporate credit rating agency jointly established by Shinhan Bank and Douzone Bizon Co., has received regulatory approval to commence operations, according to the bank on Thursday.

Formerly known as Douzone Ratings, this service evaluates corporate credit using financial and non-financial data and provides the ratings externally. With this approval, Techfin Ratings becomes the first Korean corporate credit bureau platform that is licensed to provide qcorporate credit ratings and business information inquiries.

Douzone Bizon plans to use Techfin Ratings‘ technology and licenses to develop financial services for small and medium-sized enterprises and sole proprietors, accelerating the establishment of an internet-only bank. Shinhan Bank stated that it is seeking ways to create synergy that go beyond simple investment.