(Yicai Global) Dec. 15 -- Chinese banks speeded up the cull of brick-and-mortar branches this year as the coronavirus outbreak further encouraged the shift to digital finance.

More than 2,800 outlets closed in 2020, bringing the total number shuttered in the past two years to over 6,000, according to figures the China Banking and Insurance Regulatory Commission released today. Large state-owned lenders shut more than rural commercial banks.

“State-owned and joint-stock banks set up more outlets than needed in the era of staking out markets,” a banking sector analyst told Yicai Global.

They overestimated demand for in-branch tiller services amid a financial technology boom in the country, and Covid-19 has led to an even greater use of online and mobile banking.

“More companies and individuals prefer online financial transactions and rely much less on brick-and-mortar outlets with the development of digital finance, especially since the Covid-19 outbreak,” the analyst said.

The cost of keeping branches open is high. One state lender spends more than CNY100,000 (USD15,236) a year on each multifunction super-counter, rent, electricity and labor, according to a branch manager in southwest China. Revenue cannot cover costs if a branch has little footfall or competition between financial institutions is strong.

“Some outlets have very few clients a day and so just open two or three windows and finish most business in the morning,” a staffer at a state-owned lender said. “Low salaries for counter staff are also unattractive to youngsters.”

Banks are likely to continue to downsize outlets, but online services cannot replace all branch functions, Luo Zhenxin, a post-doctoral researcher in finance at Peking University, told Yicai Global. Seniors, for example, are used to physical outlets, and face-to-face service is better for high-net-worth individuals, Luo said.

Some banks are still opening branches in economically developed counties or townships to promote inclusive finance. That meets regulatory requirements and lenders’ own need for growth, another bank employee said, adding that “we must do business that we dared not do before to lure more clients in the face of intense competition.”

Editors: Tang Shihua, Ben Armour