When the Bank Comes to You : Branch Network and Customer Omni-Channel Banking Behavior

Banks today have been increasingly reducing their physical presence and redirecting customers to digital channels, and yet, the consequences of this strategy are not well studied. This paper investigates the effects of banks' branch network changes (i.e., branch openings and branch closures) on customer om-ni-channel banking behavior. Using approximately 0.85 million (33 months') anonymized individual-level banking transactions from a large commercial bank in the U.S., this paper shows the asymmetric effects of branch openings and branch closures on customer omni-channel banking behavior. In particular, we find that branch openings increase customers' branch transactions, however the first branch opening leads to a migration of complex transactions to the branches, which might result in a net decrease in online banking in the short term. As consumers interact more with the physical channel, there is a gradual synergistic increase in customers' transactions via online banking as well as alternative channels due to a learning spillover effect. The learning spillover effect goes from easy online inquiries to more complex online transactions as additional branches open. On the contrary, branch closures result in a favorable migration pattern from the branch channel to online banking. This pattern, however, could be reversed once the last branch closes within the customer's residential neighborhood. Our study teases out the underlying mechanisms that drive customer omni-channel banking behavior in the context of branch openings and branch closures, and discusses the managerial implications for branch network restructuring and banking channel management