Bank Transformation Observation: Branches Focus on "Subtraction," Technology Emphasizes "Addition"

CNR Beijing, March 11 (Reporter Wang Ying) — According to the Voice of China Central Radio and Television’s “World Finance” program, the banking industry is quietly entering a new phase of transformation: on one hand, “subtracting” — reducing marketing expenses and consolidating branches; on the other hand, “adding” — significantly increasing investment in technology.

Currently, the banking industry shows a dual trend: offline branch closures and consolidations continue this year, especially among rural commercial banks and rural credit cooperatives; meanwhile, banks are relentlessly investing in AI large models, with tech departments even expanding recruitment against the trend.

Regarding the deeper logic behind bank branch mergers and closures, Dong Ximiao, Chief Economist at Zhaolian, explains: “By 2025, the total number of bank branch withdrawals will increase compared to 2024, mainly for two reasons: first, banks are proactively adjusting and orderly reducing the number of offline branches; second, the ongoing reform and risk mitigation efforts in the banking sector are accelerating the exit of some branches. Rural commercial banks and rural credit cooperatives have closed many branches because the reform and risk mitigation speed in the rural credit system has greatly accelerated in 2025, leading to the closure of some inefficient and ineffective branches. Despite the large number of closures, the banking industry will see a net increase of 623 branches in 2025, marking the first positive growth in nearly three years, with the overall number of branches remaining relatively stable.”

In fact, this optimization of branch layout is closely linked to the widespread application of AI technology. Dong explains: “On one hand, new technologies such as artificial intelligence, big data, cloud computing, and the Internet of Things provide strong support for services like mobile banking and intelligent customer service. On the other hand, customer behavior is undergoing profound changes; more and more customers prefer digital and mobile service experiences, making it difficult for single branches to meet the demand for anytime, anywhere service. In the long run, reducing the number of branches and optimizing their structure while enhancing their functions is an inevitable trend.”

Contrasting sharply with branch consolidation and marketing expense reduction is the banks’ heavy investment in technology. Lou Feipeng, researcher at China Postal Savings Bank, points out: “Currently, the trend of ‘cutting traditional expenses and increasing AI investment’ essentially reflects a strategic shift from scale expansion to efficiency-driven development, meaning the logic of banking development is shifting from quantity to quality.”

Of course, the road of transformation is not smooth. As AI investments continue to grow, banks face multiple challenges such as data security and technological adaptation. Balancing AI application with risk control has become an urgent issue for the industry. Lou notes: “Data security regulation may continue to tighten. Banks need to establish ‘data sandbox’ isolation for sensitive information at the technical level, using technology to achieve ‘data usable but not visible’; at the policy level, they should improve AI ethics frameworks and algorithm audit mechanisms to ensure transparency and interpretability of model decisions; organizationally, they need to coordinate AI application and compliance.”

It is also noteworthy that increased AI investment is driving profound changes in the talent ecosystem of banks. Expanding tech departments and transforming existing staff structures are becoming common trends. This talent realignment is reshaping the industry’s talent landscape. Lou explains: “Demand for traditional roles like tellers is shrinking, organizational structures are becoming flatter, and there is deep integration between tech and business departments. In the future, the core competitiveness of ‘tech + finance’ hybrid talents will lie in: mastery of cutting-edge technologies like AI algorithms and big data analysis, understanding banking credit, asset management, and risk control, and being able to translate technological innovations into specific business solutions.”

For small and medium-sized banks, facing industry competition driven by AI investments, keeping pace with transformation and avoiding marginalization are key to development. Dong suggests: “SMBs generally face the ‘three shortages and one weakness’—limited funds, talent, data, and weak technical capabilities. They can adopt a follow-the-leader strategy, plan carefully before acting, and explore AI application paths suited to their characteristics. For example, focusing digital and intelligent investments on key regions and core customer needs to improve return on investment.”