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Authorities scramble to prevent banks from 'deserting' less tech-savvy customers

Published: 04 Feb. 2026, 16:19 Updated: 04 Feb. 2026, 18:16

A notice announcing the merger of two KB Kookmin Bank branches is posted up on the entrance of a branch near Seoul Station in central Seoul on Feb. 11, 2025. [YONHAP]

Authorities are scrambling to counter a so-called desertion by banks as the shift to digital services risks restricting access for less technologically inclined customers.

The concern is considered more acute in regions outside the capital area and among the older population.

The Financial Services Commission (FSC) said on Wednesday that it will begin implementing countermeasures for bank branch closures starting in March, following a meeting with its financial consumer outreach team.

The team is a consultative body created to improve financial systems and practices by gathering opinions from a wide range of consumers.

The number of bank branches nationwide fell by 14 percent over the past five years, according to the FSC. As of the end of September of last year, there were 5,523 branches, down by 904 from 6,427 in September 2020.

The decline came as a reduction in in-person transactions became routine after 2019 due to the Covid-19 pandemic, while banks pursued greater management efficiency.

A customer receives banknotes from a teller in a Hana Bank branch in Seocho District, southern Seoul, on Feb. 8, 2024. [NEWS1]

The gap between large cities such as Seoul and Busan and other regions has also widened. As of the end of September last year, the national average number of bank branches per square kilometer (0.38 square miles) was 1.25. Seoul had 4.23 branches per square kilometer, while all provincial-level regions had fewer than two branches per square kilometer, with the exception of Jeju Island.

Travel distance to the nearest bank also varied sharply by region. Residents in the top 10 percent of regions traveled an average of 134 meters (440 feet), while those in the bottom 10 percent had to travel an average of 4.8 kilometers (3 miles), according to the Korea Institute of Finance.

“Most metropolitan and provincial regions outside major cities have branch densities below the national average relative to population, resulting in wide regional disparities,” the FSC said.

The trend reflects changes in how people use financial services, including the expansion of non-face-to-face transactions.

Only 29.1 percent of financial consumers aged 20 to 64 said they had visited bank in the past six months, according to a Hana Financial Research Institute report on financial consumer trends for 2026. The share has declined every year since 2022, when it stood at 37.9 percent.

Customers interact at a KB Kookmin Bank branch in Yeouido, western Seoul, on March 27, 2023. [YONHAP]

Authorities plan first to tighten standards for branch closures. Previously, the consolidation of branches within 1 kilometer of each other were treated as exceptions that did not require formal closure procedures.

In such cases, banks were exempt from the obligation to present measures to prevent financial service gaps, such as providing alternative services. As a result, of the 314 branches closed between May 2023 and October last year, 203, or 65 percent, were merged with nearby branches.

“Even in these cases, banks will be required to go through procedures such as prior impact assessments and collecting opinions from local communities,” a FSC official said.

The FSC will also expand alternatives to physical branches. In cities with large populations of younger and middle-aged adults, so-called digital branches that operate two or more remote teller video kiosks and smart teller machines.

ATM machines are lined up in central Seoul on Feb. 1. [YONHAP]

In addition, mobile branches will be set up at nearby welfare centers or community offices, and banks will be required to actively provide guidance on accessing services such as open banking information through mobile phones when branches are closed.

Authorities also plan to expand the installation of ATMs shared by multiple banks not only in traditional markets but also at public institutions.

The government is also pushing measures to discourage banks from closing branches outside major cities.

Under the regional reinvestment evaluation system, regulators plan to impose heavier penalties on banks that shut down branches in smaller cities and rural areas. The system evaluates banks based on how well they support local communities, including lending to small businesses and low-income borrowers, the supply of local funds and the maintenance of financial infrastructure.

“This is intended to encourage financial companies to support regional economic growth,” a FSC official said. “We plan to use this information as criteria for selecting local government and local education office treasury managers.”

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
BY KIM SEON-MI [[email protected]]