Strategy consulting firm Roland Berger has predicted that about 567 retail bank branches in Malaysia will close down within the decade, bringing the number from 2,467 branches in 2020 to 1,900 branches in 2030. Revealed in a report titled “Branching Out: The Future of Retail Banking Networks – A Global Perspective With A Focus On Southeast Asia”, this decline amounts to a drop of 23%.

According to the report, the move away from branch-based services is driven by several factors, including technological advancements, digitalisation and ease of access to information, changes in demographics, as well as greater financial literacy. As such, banks will need to rethink the strategies that are to be adopted by their branch networks.

“They [the banks] need to address the upcoming challenges of the decline of the branch role sooner rather than later, preparing for a redesigned, repurposed, and reduced network. Failing to do so will profoundly impact retail banks’ profitability, leaving oversized branch networks underutilised,” said Philippe Chassat, who is a co-author of the report and a senior partner at Roland Berger.

That said, Chassat reassured that bank branches will not completely disappear from the Malaysian banking landscape by 2030, despite the growth in digital channels and upcoming digital-only banks in the market. Instead, they will continue to co-exist with the other digital channels.

“Branch networks are in need of a significant transformation and resizing, but they are still a distinctive asset that traditional banks own over pure digital banking players. Despite the great strides made in consumer adoption of digital banking in the past decade, very few, if any, of the purely digital banks around the world have managed to successfully take on traditional banks. The road to a complete digital banking environment without branches in Malaysia goes well beyond 2030,” Chassat explained.

Chassat also went on to clarify that the role of bank branches will likely evolve over the next decade to focus on handling a more specific set of advisory activities and high-value-added products, including bancassurance, investment, or real estate financing. Other daily banking tasks and first-level customer services will be automated by leveraging on artificial intelligence and machine interface.

Aside from shedding light on the potential downsizing of banks in Malaysia, the report from Roland Berger also provided commentaries on the retail banking landscape in several other Southeast Asian countries. Overall, it said that there will be an 18% net reduction of retail bank branches across Southeast Asia by 2030, totalling to over 11,000 branches closing. The bulk of the closures is expected to happen in Indonesia, Thailand, and Philippines, alongside Malaysia.

Meanwhile, the number of bank branches is forecasted to steadily increase in Vietnam, Laos, Cambodia, and Myanmar as these countries have relatively underdeveloped banking sectors with low branch densities.

You can find out more about Roland Berger’s “Branching Out: The Future of Retail Banking Networks – A Global Perspective With A Focus On Southeast Asia” report here.

(Source: The Edge Markets)

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• Bank Branches
• Digital Banking
• Digital Banks
• Mobile Banking
• Online Banking
• Philippe Chassat
• Roland Berger