Bank Branch Persistence in the Digital Age

The rise of online banking has led many observers to predict a declining role for physical bank branches. Yet, despite ongoing consolidation, major banks continue to maintain extensive branch networks. This paper evaluates whether branch proximity still influences consumers’ choice of bank. We combine a panel of branch locations for Canada’s six major banks with consumer credit bureau data covering lending relationships between 2016 and 2024. Using a discrete-choice model of lender selection and an instrumental variables strategy based on historical branch networks, we estimate the effect of branch access on local market shares. Contrary to the conventional digitalization narrative, we find that borrowers remain substantially more likely to choose banks with nearby branches. The estimated relationship is economically meaningful, robust to a range of alternative specifications, and shows little evidence of weakening over time. Furthermore, we find that the importance of branch proximity is remarkably consistent across age groups. While younger borrowers increasingly obtain loans from non-bank and branchless lenders, proximity continues to influence their choice among major banks. These findings suggest that technological change has not yet eliminated the competitive importance of physical branch networks.