Determinants of Bank Closures: What Ensures Sustainable Profitability in Mobile Banking?

Owing to the recent increase in mobile banking customers, studies exploring self-service channels and customer responses as distribution channels in the retail banking industry are also rapidly expanding. Moreover, with the emergence of big data and a series of artificial intelligence (AI) technologies, customer pattern analysis using deep learning, insurance fraud prevention, software development and various types of blockchain-based FinTech technologies, offline banks are disappearing. Accordingly, many commercial banks are attempting to find technological alternatives. However, maintaining a profitable bank branch is a crucial factor in the relationship between service quality and customer satisfaction because excellent service quality prevents existing customers from leaving. This study sought to quantitatively prove the change in customer service quality and profit due to the introduction of technology in the financial industry. We microscopically compared the effects between bank branch closures and changes in net profit using a time-series analysis. Specifically, we quantitatively analyzed actual customer attrition behavior with a time-series analysis across the three quarters before and after the closure of 88 branches of major commercial banks in South Korea in the Seoul metropolitan area and nearby cities. The findings prove that branch closures and multi-channel effects in the financial sector are gradually being resolved through immediate technology acceptance, contrary to popular concern.