Bank Branch Closures and the Local Customer Base: Evidence from Consumer Credit Data

Recent years have seen the rapid expansion of online banking alongside a steady decline in local bank branches. Understanding the determinants of branch closures is of growing interest to researchers and policymakers concerned about access to financial services. A key unresolved question is the role of the local consumer base in shaping banks’ decisions to close branches. To address this, we use detailed consumer credit data to construct branch-level measures of the size, composition, and borrowing activity of the surrounding customer base for bank branches across Canada from 2015 to 2024. We examine whether declines in the value of local consumer lending help explain why some branches close while others remain open. We also compare this mechanism to alternative explanations, including local economic conditions and demographic change, to assess its relative importance. This work provides new evidence on the economic drivers of branch closures and has implications for policymakers concerned with maintaining access to banking services in communities that rely on physical branches.