You don’t have to have much sympathy for the bosses of German savings banks or Volks- and Raiffeisenbanks. But it might be worth taking your perspective for a moment: So you run a money house with a head office and, depending on the size, five, 15 or 50 branches. They are deeply rooted in their region and have a long tradition, but business has become more difficult over the past 20 years for a number of reasons. The low interest rates have caused profits to melt away, more and more customers are buying cheap ETFs instead of expensive funds that bring money to the institutes, more and more customers are doing their banking online, and fewer and fewer are appearing in the branches. The bankers often no longer get to see their customers in order to do business with them.
Every boss of a savings bank or cooperative bank can tell you about it: from branches in small towns or districts where, for security reasons, two employees have to stand behind the counter all day and then maybe four or five customers come. And of those, three are elderly people who withdraw their pension from the counter because they can’t use the ATM. The branch’s income is close to zero, while there are costs for staff, for rent and for loading the ATM. You don’t have to be an ice-cold capitalist to realize that such a business model cannot work in the long run.
Bank branches suffer the same fate as many inns, butchers and bakeries in small towns that are no longer profitable because people prefer to shop cheaply at Aldi in the commercial area of the nearest district town: they are closed. The branch dying is not a new development, it has been going on for 30 years. Today there are not even half as many bank branches in Germany as there were in the 1990s.
The number of bank branches in Germany will continue to fall
In recent years, the trend has intensified again, and a small bank in Hesse is now driving the development to the extreme: Raiffeisenbank Hochtaunus is closing all four of its branches, there are no longer any counters and no cash, only online accounts and Consultation at headquarters. The bank wants to earn its money primarily with commercial real estate, nationwide.
It’s a radical move that’s causing a stir in the banking landscape. The head of the institute sees himself as a pioneer and predicts that smaller financial institutions in particular will do the same in the foreseeable future. The view is extreme, because when a bank closes its branches, it robs itself of its livelihood, and not every institution can set up a nationwide replacement business. What is almost certain, however, is that the number of bank branches in Germany will continue to fall. It would be almost negligent for those responsible to keep unprofitable branches alive.
Customers vote with their feet, and if they no longer come into the branches, then the majority of them apparently don’t need them either. Younger people in particular do their banking online and pay for their purchases by card. Many of them have never seen the inside of a bank branch in their entire lives.
It goes without saying that providing citizens with cash has always been a task for the credit institutions. But it costs money, most financial institutions subsidize this with income from other areas across the board. This has only become visible in recent years, because the income is no longer so bubbling and the banks have to pay more attention to their costs. In addition, the Bundesbank has abandoned the supply of cash in some cases and burdened the banks with additional costs.
It would be fair to have a discussion about this division of responsibilities. Cash is important. It cannot be a goal to leave payment transactions entirely to credit card companies and tech companies, if only for data protection reasons. Especially since there are also ATMs without a branch and even supermarkets now pay out money. Anyone who demands that banks should keep their branch network as dense as possible, if only so that older people are not excluded from social life, is burdening them with too much responsibility.