The Canadian Branch Banking System: Cost and Marketing Implications

Abstract

The results of a study on the cost efficiency of expanding and marketing bank services through branching rather than through the formation of new banks are given. Using detailed cost and bank service output data from a large sample of bank branches across Canada, several issues of interest to bank management and marketing officials are addressed. The evidence presented indicates that some Canadian banks may not be benefiting fully from their ability to rationalise their activities. Retail and commercial banking branches operate according to different technologies for producing financial products and services. Small commercial branches show less potential for economies of scale than retail branches. However, this potential does not appear to shrink as rapidly as it does for retail branches. Finally, both retail and commercial branches show benefits from specialisation. As a result of these technological characteristics, banks may be well advised to maintain their marketing strategy of segregating their retail business from commercial business.

Citation

Gandhi, D.K. and Switzer, L.N. (1988), "The Canadian Branch Banking System: Cost and Marketing Implications", International Journal of Bank Marketing, Vol. 6 No. 4, pp. 55-64. https://doi.org/10.1108/eb010838