Reduction of Bank Branches
It has been known that Citibank Korea will significantly slash its number of branches to 25 from 126 nationwide this year. When the downsizing plan is implemented, it will leave just 21 branches in the Seoul metropolitan area, and one branch each in Daejeon, Daegu, Gwangju and Busan.
The plan to considerably prune Citibank Korea’s branches is an extreme and radical measure unprecedented in the history of the Korean financial industry and has sparked off a conflict between labor and management. If the past industrial revolution or technological advances stole jobs from manual laborers such as factory workers among others, a wave of the fourth industrial revolution is fueling a concern that the wave will make obsolete bank employees considered once a representative decent white collar job.
The next-generation consumer finance strategy announced by Citibank on March 27 aims to promote the use of digital services and significantly prune branches. This is because Citibank Korea believes that financial consumers are already using a lot of services through digital channels (95% in the case of Citibank), the US-based bank does not need to maintain offline branches. At that time, Brand Carney, head of the Consumer Finance Group at Citibank Korea, made it clear that the bank will shift the center of banking to online from branches, saying, “In the banking business, a digital channel towers over a sales channel.”
Even though Citibank is claiming that the measure is to take steps to respond to changes in its digital business environments, but there is a growing concern that slashing branches may lead to a staff restructuring. However, "There is no artificial restructuring," Citibank has said.
However, Citibank's massive branch closedowns can lead to branch employees’ natural retirement. "Employees operating in provincial areas are forced to retire naturally when their branches are shut down." said an employee at Citibank, adding, "They will not be able to continue to work at branches in the metropolitan area after leaving their offices in provincial areas. The management's statement that there will be no artificial restructuring is merely a sugarcoated promise."
The union's full-scale backlash was created at the beginning of early April, about a week after the strategy was announced. The counteraction was prompted by the announcement, at a briefing session by the management on April 4, of a plan to relocate branch employees to phone and digital service jobs similar to those at existing call centers. "The company claims that the move is 'integration' rather than 'closedown.' But it is the company's plan to move most of employees at closed-down branches to call centers," a Citibank labor union official said. The union claims that the relocation of workers is the management’s ruse to lead employees to retire as the measure will give full-time regular workers call center work which contract workers have done.
Citibank union members have been protesting against the company's plan while holding a one-person protest against the shutdown of branches in front of Citibank’s head office and major branches since April 11.
The financial industry is paying much attention to the consequences of Citibank's unprecedented test and opposition from the labor union. On top of that, there is a concern that the "evolution" in the financial industry symbolized by enlargement via mergers and acquisitions may have entered a period of radical downsizing due to digital innovation.
The radical downsizing of banks which will dramatically reduce the number of off-line branches, is a trend that has already been going on abroad for several years. Recently, Lloyds Bank decided to shut down 100 branches and RBS 158 branches in the UK. Last month US consulting firm Opimas release a report that says 230,000 bank jobs will disappear around the world by the year of 2025.
A prospect that even bank jobs will be taken by machines, such as artificial intelligence, is casting a dark shadow on Korean society where jobs are vanishing. The number of bank branches in Korea, which rose to 6,556 at the end of 2014 and 7,445 in 2015, and then slid to 7,280 at the end of last year.
In the meantime, Citibank Korea's largest shareholders are Citibank and CIOC which hold a 100% stake in Citibank Korea. Last year, Citibank Korea posted net income of 212.1 billion won (US$190 million), of which 49.8% (dividend payout ratio) was paid to Citibank and CIOC as dividends.