The number of German bank branches has dropped by some 25% since the year 2000 and could fall by the same rate by 2035 if the closures continue at the current pace, according to a new study by development bank KfW.

German banks closed 680 branches on average in each of the last 15 years, bringing the total number of closures to some 10,200 since the turn of the century. Branches in all three pillars of the German banking system, including cooperative, savings and private banks, were closed at a similar pace, as lenders bowed to the pressure of technological advancement, growing competition and changing customer needs. The number of branch closures accelerated markedly in 2014 and 2015 with 2,200 closures in those two years alone, KfW said Oct. 9.

With 3.5 bank branches per 10,000 citizens, Germany currently ranks close to the EU average of 3.7 branches per 10,000 citizens. The consolidation trend in the coming years is like to continue both in Germany and Europe-wide, KfW projected. Apart from cost pressure and overcapacity, another key driver for consolidation in the banking sector remains digitization. There are two main consequences of digitization: on the one hand, it allows the sustainable transformation of business processes, and on the other, it acts as a catalyst for changes in customer needs. A growing number of retail customers as well as corporate clients demand round-the-clock availability of their bank, real-time advisory services, mobility and tailor-made offers.

Branches are especially important for small businesses, which still prefer to have a bank adviser when negotiating the next financing round with their lender. As long as bank services that are important for SME clients are maintained, the impact of the continuing bank closures on the German economy will be negligible, Jörg Zeuner, chief economist at KfW said in the study.