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Saudi’s closing of bank branches is also a global phenomenon

Saudi banks are closing more branches across the kingdom, and globally the same phenomenon is being felt, especially in the US, where a new report says traditional banks are just over 10 years away from being extinct

In Riyadh, 29 branches closed down, representing 30.5% of closures nationwide Only 2 out of 10 customers visited their bank branch in a month’s time in Saudi 87% of American banking consumers use online services, with 89% of millennials preferring digital services

Saudi banks are closing more branches across the kingdom even as these lenders hand out more loans to consumers, figures from the Saudi Central Bank (SAMA) monthly report showed.

The number of different bank branches in Saudi fell by 95 to 1,969 compared to the second quarter of 2020, when the number of branches reached 2,064, or a 4.6% drop.

At the same time, the number of ATMs decreased by almost 9%.

This is despite commercial banks increasing their lending to individuals in Q2 of this year by 17% to $106.5 billion.  

An increase in online and digital banking is perceived culprits for branch declines.

In Riyadh, 29 branches closed down, representing 30.5% of closures nationwide. The Makkah region saw a decrease of 6.1% after the closure of 27 branches, representing 28.4% of all shutdowns. 

The number of branches in the Eastern Province decreased by 6.7% after closing 27 branches there, representing 28.4% percent of total closures.

The number of branches did not change in either the Hail region, which has 43 branches, or the Najran region with 27 branches.

Saudi online payments

At the peak of the COVID-19 pandemic last year, online payments in Saudi witnessed a significant increase in volume.

For example, MADA payments through point-of-sale devices increased by 67% to 543 million transactions compared to the same period in 2019, while online payments via the internet increased by 406% to 20.8 million transactions during the same period.

It is believed that fintech and digital banking will force banks around the world to close down more branches in the near future. Saudi Central Bank’s recent approval for two digital banks to operate in the Kingdom (STC Bank and Saudi Digital Bank) is a clear indication that most banks in Saudi Arabia will begin to shift to the digital world.

A recent national survey conducted in the Kingdom by a Fintech Saudi team revealed that only 2 out of 10 customers visited their bank branch in a month’s time and 93% of customers primarily conduct their banking transactions electronically. Additionally, 3 out of 4 customers use at least one fintech solution.

US Bank branches to go extinct by 2034

A new study has reinforced the view that traditional banks are on the decline, citing advancements in technology and internet access for the continuing trend.

The study, titled “The Death of Banks,” noted key insights including a 6.5% decline in US bank branches since 2012.

This trend would see the total number of physical banks nationwide fall to fewer than 16,000 by 2030 and all branches closing by 2034, raising concerns that traditional banks may end up taking on riskier loans or non-traditional activities to remain profitable in the subsequent years.

 The study was conducted by N26, a German neobank headquartered in Berlin, and Eric Taylor, a director of UX research at Varo Bank, a mobile-only neobank.

Three of the five largest banks in the US closed branch locations at a rate of greater than 7% over the period between 2014 and 2018, Smart Asset reported.

The Varo/N26 report found that 87% of American banking consumers use online services, with just under 89% of millennials preferring digital services.

Over 50% of those same consumers said they believe online-only banking will outnumber physical branches in the next two decades.