Online Competition The Slow Death of Branch Banking

The number of banks and branches closing doors in Germany is rapidly increasing as consumers switch to online banking. Low interest rates also don't help.
Managing money in local branches is becoming a thing of the past.

Even more German banks closed their doors last year, according to official Bundesbank statistics. Numbers dropped by 3.7 percent to 1,888 in 2016, compared to a decline of 1.5 percent the year before.

"The consolidation process has gained momentum," said Andreas Dombret, a board member of Germany's central bank, who attributes the shrinking number of banks to persistently low interest rates as a reason. Competition from low-cost direct banks is another.

At the same time, the number of German bank branches closing their doors continues to increase. At of the end of 2016, Germany had 32,026 branches, a decline of 5.9 percent compared to the previous year.

The Sparkasse group of savings banks, which operates Germany's largest branch network, closed 922 offices, the most of any financial institution countrywide.

The strong growth of online banking has made traditional trips to bank branches unnecessary. At the same time, maintaining branches, with their employees and buildings, has become expensive.

The downsizing of bank branches is likely to continue, according to analysts. Consulting firm Investors Marketing expects the number of branches in Germany to drop by 39 percent to less than 20,000 between 2016 and 2025.