What is the future of the bank branch in the midst of the 4.0 industrial revolution? Answers from Vietnam
-
DOIhttp://dx.doi.org/10.21511/bbs.17(2).2022.17
-
Article InfoVolume 17 2022, Issue #2, pp. 199-208
- Cited by
- 627 Views
-
243 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
Digital channels (websites, bank apps, mobile banking) are incrementally improving as a result of technology innovation and changing customer behavior. The unprecedented Covid-19 pandemic has just added to this trend by urging people to work and make all financial transaction through the Internet. In this context, the question arises of whether banks should revive their physical branches or take the opportunity to shift to mainly digital platform? This research focuses on the branch network trend of Vietnamese commercial banks during the period 2012–2019 to answer the question, what is the contribution of bank branch networks to the banks’ profits. Panel data from 22 largest Vietnamese commercial banks in terms of owners’ capital has been analyzed, using Random Effect Model (REM) regression models. The results show that Vietnamese banks are still expanding their branch networks, despite the fact that bank customers are increasingly engaging in digital bank services. The number of branches has a positive correlation with the banks’ profits, although there is a disparity between large network banks and the rest. The research suggests some implications that can help optimize the branch network in the context of digitalization in an emerging market.
- Keywords
-
JEL Classification (Paper profile tab)G21, G41, M31
-
References33
-
Tables5
-
Figures0
-
- Table 1. Summary of variables
- Table 2. Summary statistics
- Table 3. Correlation
- Table 4. Multicollinearity test
- Table 5. Multiple regression results
-
- Berger, A. N., Dick, A. A., Goldberg L. G., & White, L. (2005). The Effects of Competition from Large, Multimarket Firms on the Performance of Small, Single-Market Firms: Evidence from the Banking Industry. Finance and Economics Discussion Series, 15, 1-36.
- Berger, A. N., Leusner, J. H., & Mingo. J. J. (1997). The Efficiency of Bank Branches. Journal of Monetary Economics, 40(1), 141-162.
- Berger, R. (2015). Digital Revolution in retail banking. Interview with Egbert Wege.
- Bikker, J. A. (2010). Measuring Performance of Banks: An Assessment. Journal of Applied Business and Economics, 11(4), 141-159.
- Brevoort, K., & Wolken, J. (2008). Does Distance Matter in Banking?
- Capgemini. (2012). World Retail Banking Report 2012.
- Demirguc-Kunt, A., & Huizinga, H. (1998). Determinants of commercial bank interest margin and profitability: some international evidence. World Bank Economic Review, 13(2), 379-408.
- Dick, A. A. (2002). Demand Estimation and Consumer Welfare in the Banking Industry. Board of Governors of the Federal Reserve System. Finance and Economics Discussion Series, 14.
- Do, T. H. (2021). Research impact of E-banking services on operation results of Vietnam commercial bankers (Unpublished Doctoral Dissertation). Thuong Mai University.
- Edmonds, T. (2018). Bank Branch Closures (Briefing Paper No. 385).
- García-Herrero, A., Gavilá, S., & Santabárbara, D. (2009). What explains the low profitability of Chinese banks? Journal of Banking and Finance 33(11), 2080-2092.
- Grzelonska, P. (2005). Benefits from Branch Networks: Theory and Evidence from the Summary of Deposits Data. University of Minnesota.
- Hanh Phuc. (2014). Ngan hang du nhau “banh truong” mang luoi hoat dong. Nhip song doanh nghiep.
- Hannan, T. H., & Prager, R. A. (2004). The Competitive Implications of Multimarket Bank Branching. Journal of Banking and Finance, 28(8), 1889-1914.
- Hannan, T. H., & Prager, R. A. (2006). Multimarket Bank Pricing: An Empirical Investigation of Deposit Interest Rates. Journal of Economics and Business, 58(3), 256-272.
- Hirtle, B. (2007). The impact of network size on bank branch performance. Journal of Banking and Finance, 31(12), 3782-3805.
- Hirtle, B., & Metli, C. (2005). The evolution of US bank branch Networks: Growth, Consolidation and Strategy. Current Issues in Economics and Finance, 10(8), 1-7.
- Ho, K., & Ishii, J. (2010). Location and Competition in Retail Banking. International Journal of Industrial Organization, 29(5), 537-546.
- Kekevi, C. (2020). How the Covid-19 crisis is impacting branch banking. Accenture Banking, Guest Blogger Series [Online].
- Kempson, E., & Jones, T. (2000). Banking without branches: a study of how people conduct their banking business without a local branch. University of Bristol.
- King, B. (2012). Bank 3.0. Why banking is no longer somewhere you go, but something you do (1st ed.). Wiley.
- King, B. (2014). Breaking banks: the innovators, rogues, and strategist rebooting banking (1st ed.). Wiley.
- Mekinjić, B. (2019). The impact of industry 4.0 on the transformation of the banking sector. Journal of Contemporary Economic, 1, 7-28.
- NCRC. (2017). Research Memo. Bank Branch closures from 2008–2016: Unequal impact in America’s Heartland.
- Nyatika, S. (2017). Spread in branch network and financial performance of commercial banks in Kenya (Master’s Thesis). University of Nairobi.
- Orlow, D. K., Radecki, L. J., & Wenninger. J. (1996). Ongoing Restructuring of Retail Banking (Research Paper No. 9634). Federal Reserve Bank of New York.
- Park, K., & Pennacchi, G. (2008). Harming Depositors and Helping Borrowers: The Disparate Impact of Bank Consolidation. The Review of Financial Studies, 22(1), 1-40.
- Rekha, M. (2019). MLmuse: Correlation and Collinearity – How they can make or break a model. Clairvoyant blog.
- Spieker, R. L. (2004). Bank Branch Growth Has Been Steady – Will it Continue? FDIC Future of Banking Study.
- Trujillo-Ponce, A. (2013). What determines the profitability of banks? Evidence from Spain. Accounting & Finance, 53(2), 561-586.
- Tumay, K. (2020). Realigning the Bank branch for the new normal with analytics. [Online].
- WEF. (2016). Fourth Industrial Revolution: what it means, how to respond. World Economic Forum.
- Zardkoohi, A., & Kolari, J. (1994). Branch office economies of scale and scope: evidence from savings banks in Finland. Journal of Banking and Finance, 18(3), 421-432.