In year 1327, no less than 43 branches of Italian banks were crammed into the French city of Avignon. It was probably the earliest example of what modern-day experts call “overbanking” – where there are too many credit institutions bunched together to make any money.
It took almost 700 years until the unbroken expansion of banking in Europe ended and the demise of local retail branches began. Some German banks, however, still don’t want to accept this fundamental fact – and it threatens their future.
Just how differently German banks are preparing for the future could be seen last week. HypoVereinsbank in Munich said that almost half of its network of branches would be eliminated – from 580 to 340. Commerzbank stressed it would maintain a large number of branches, currently 1,200. The bank’s argument: Despite digitalization, it continues to gain most customers through traditional bank branches.
If that’s true, Commerzbank might be winning the wrong kind of customers. The bank might actually pick up dissatisfied customers of rival banks who are angry over their longtime branches being closed. One of Commerzbank’s strategies is to offer extras to lure customers as competitors cut back. But that’s a short-term gain. In the long run, hanging on to a network of expensive branches simply won’t pay off.