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Japan's banks gain flexibility over branch hours to serve aging customers

Any opinions expressed inthis piece are those of the author and do not represent the views of S&PGlobal Market Intelligence.

InJapan, one can withdraw money from convenience stores that are open 24/7, and Internetbanking services have been around for some 20 years. But it is only this monththat Japan's financial regulators have moved to allow banks flexibility inopening and closing their bricks-and-mortar branches to suit customers' needs.

Theproposed change,which could be implemented as early as August, will allow banks to deviate fromthe standard operating hours of 9 a.m. to 3 p.m., The Nikkei reported. The Financial Services Agency is acceptingpublic comment on the proposal until Aug. 17.

Withthe ubiquity of the Internet, why make this change now?

Theanswer lies in Japan's rapidly ageing society — where people 65 years or oldermade up 26.7% of the country's population as of Oct. 1, 2015, compared with12.1% in 1990, according to data from the government's Cabinet Office. Thisfigure is expected to hit 30% by 2025, according to government estimates.In comparison, people 65 years and older only made up 13.0% of the U.S.population, according to the most recent census conducted in 2010.

"Someelders are not used to the Internet. Think of a small branch with only twoworkers. If they try to maintain the current operating hours, it would bedifficult for either or both of them to take a lunch break. If they can closetheir counter from 1 p.m. to 2 p.m., things would be much easier," an FSAspokesman told S&P Global Market Intelligence.

Theimportance of physical branches is even more essential in rural areas outsidethe main metropolitan centers. Compared to Tokyo, where those above 65 made up22.5% of the population as of Dec. 31, 2014, most provincial areas already pegthat figure at around 30%.

Withthe rule revision to allow banks greater flexibility, lenders can tailorservice hours for even the smallest branch in outlying areas.

Thismay help elders who are not used to the Internet in remote communities, wherethere are few convenience stores, the FSA spokesman said.

"Financialservices are part of the social infrastructure. Should that function be lost,the community would disappear over time," said Shinya Furue, an analyst atNorinchukin Research Institute.

However,even if the rule change is implemented to give banks leeway in managing branchcosts, the government does not expect many rural branches to remain open.

"Whetherto maintain or close down its operations is a decision to be made by each bank.But there still are many small communities with small businesses like inns andgroceries that need bricks-and-mortar banks," Furue noted.