Publication Type

Journal Article

Version

acceptedVersion

Publication Date

3-2020

Abstract

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 omnichannel banking behavior. Using approximately 0.85 million (33 months') anonymized individual-level banking transactions from a large commercial bank in the United States, this paper shows the asymmetric effects of branch openings and branch closures on customer omnichannel 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 omnichannel banking behavior in the context of branch openings and branch closures, and discusses the managerial implications for branch network restructuring and banking channel management.

Keywords

branch network, branch openings, branch closures, online banking, omnichannel, propensity score matching, difference in differences

Discipline

Computer Sciences | Finance and Financial Management | Operations and Supply Chain Management | Operations Research, Systems Engineering and Industrial Engineering

Publication

Information Systems ResearchIn

Volume

31

Issue

1

First Page

176

Last Page

197

ISSN

1047-7047

Identifier

10.1287/ISRE.2019.0880

Publisher

INFORMS

Embargo Period

5-30-2021

Copyright Owner and License

Authors

Additional URL

https://doi.org/10.1287/ISRE.2019.0880

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