Ba nks’ Balancing Act Over New Branches Amid Rapid Digital Shift

Nairobi, Kenya — September 25, 2025

Kenyan banks are confronting a difficult strategic decision: whether to continue expanding physical branch networks in the face of surging digital banking adoption. As more than 90 percent of bank transactions are now processed digitally, banking institutions are weighing the costs of branches against the benefits of digital reach and efficiency. 

The Latest

• Equity Group CEO James Mwangi has openly acknowledged the tension: while branches remain critical for customer trust and outreach, the bank’s technology arm is increasingly central to its strategy. 

• Some banks are still opening branches—Absa Bank Kenya recently launched a branch in Kawangware, targeting underserved areas in Nairobi’s satellite towns. 

• At the same time, banks like I&M Group report that branch expansion forms part of their growth plan, even as they allocate more resources to technology and operations. 

Context & Trends

• A survey by the Kenya Bankers Association shows mobile apps now top the list of preferred digital banking channels, reflecting how customers are shifting away from branch-based transactions. 

• LinkedIn commentary notes that despite digital dominance (some banks report 99 % of their transactions are digital), major banks are paradoxically continuing to expand their physical footprints. 

• For many banks, branches serve not just transaction purposes but also brand visibility, customer support (especially for complex services), and onboarding of new users unfamiliar with digital systems.

Strategic Considerations

Pros of Retaining / Expanding Branches

• Trust & human contact: Branches provide reassurance and assist customers uncomfortable with or new to digital banking.

• High-value, complex services: Loans, mortgages, wealth management often require face-to-face interactions.

• Rural and underserved areas: In locations with weak internet, poor connectivity or low digital literacy, branches remain critical.

• Hybrid engagement: Branches can serve as hubs to acquaint clients with digital tools and support onboarding.

Risks & Costs

• Operational overhead: Staff, security, real estate, utilities, and compliance costs rise with branches.

• Underutilisation: With customers shifting digital, many branches see declining foot traffic, making them cost centres.

• Capital allocation trade-offs: Funds used for branch expansion may limit investments in digital infrastructure, cybersecurity and innovation.

• Redundancy: In mature urban markets, overlapping branch coverage can cannibalise operations.

Possible Strategies / Hard Choices

• Rationalisation and consolidation: Close or merge underperforming branches; retain only strategically valuable ones.

• Branch + digital augmentation: Convert some branches into smaller “touchpoints” with limited staff, automated kiosks, or satellite offices.

• “Branch of the future” models: Slimmed down branches focused on advisory, high-value services, with self-service counters and digital support.

• Data-driven decisions: Use transaction data, footfall analytics, and customer segmentation to decide where branches still add value.

What We Don’t Yet Know

• Which banks plan to shut or repurpose branches vs those intending fresh openings.

• The cost–benefit analyses that banks are applying (e.g. branch ROI vs digital ROI).

• How regulators and the Central Bank may respond in encouraging branch coverage or digital inclusion mandates.

• The pace at which rural and underserved regions will shift to digital banking—and whether digital infrastructure (internet, electricity) will support that shift.