· The current period is marked by changes in how banking services are obtained by individuals—they are using direct channels and reducing their use of physical branches.
· The number of branches declined in large cities due to the merging of branches near each other.
· In the past three years the number of branches in Arab localities and in peripheral areas increased, despite the decline in the number of total branches.
· The trends seen in the past decade in deployment of branches help reduce the gap between population groups and between various localities.
The banking system in Israel employs about 47,000 people domestically and abroad (a decline of 3 percent compared with the previous year), and operates in Israel through 1,152 branches (Figure 1). The current period is marked by changes in how banking services are obtained by individuals—there is a switchover from physical interaction with the bank, through the branch, to ongoing contact and activity through direct channels. The channels include (1) automated teller machines, some of which dispense cash and some of which provide information and allow the execution of financial and other banking transactions; (2) staffed call centers—some banks provide service for many more hours each day than at actual branches; (3) advanced Internet-based services, and (4) banking applications that allow customers to execute transactions from any place, at any time—these have become more sophisticated in the past two years, and allow a wide range of banking activities to be carried out.
In the past three years, some decline in the overall number of branches in Israel has been seen, though it is less of a decline than observed worldwide. The decline in Israel comes after seven years in which banking corporations opted to expand their branch network and increase their access to customers (Figure 1), primarily from the retail segments, and households in particular. The decline derives from the changes noted above in banking service consumption habits, resulting from new financial technology that allows the provision of banking products and services online. In addition, the decline also stems from processes aiming to increase efficiency being carried out by some banks.
The decline in the number of branches is seen primarily in large cities, where banks are merging branches that are in proximity to each other, while there is an increase in the number of branches in peripheral regions. In addition to the variance among localities, there is also some variance among population groups—while the total number of branches declined in the past three years, the number of branches in Arab towns increased during that time. This increase is part of a long-term trend in the number of bank branches in Arab towns, and the number of banks operating in them. Between 2004 and 2015, the total number of branches in Arab municipalities increased by about 83 percent, compared with about 11 percent in Jewish municipalities and about 9 percent in mixed municipalities (Figure 2). As of December 2015, the number of branches in Arab towns was 108, compared with 58 in 2004 (Figure 3). This change derives from business considerations and specific policy that led many banks to expand their retail activity in the Arab sector.
The trend of increase in the number of branches is also occurring, as noted, in localities in the peripheral regions. In the past three years, the number of branches in localities considered “peripheral” or “very peripheral” has increased, while the number of branches in "central" or "very central" localities declined (Figure 4). Between 2004 and 2015, the number of branches in the peripheral regions increased by about 30 percent, cumulatively.
These positive trends assist in narrowing the gap in branch deployment between central localities and those away from major population centers, and between Jewish localities and Arab ones. Although these gaps can be explained by numerous economic variables, including the locality’s population size, its socioeconomic status, and the extent of borrowers’ risk, the Banking Supervision Department is working to increase access to banking services for all customers—it encourages banks to continue providing services everywhere, among other things by granting them authorization to integrate financial technologies that increase the accessibility of the services any place, any time, and reduce the importance of, and the need for, a physical branch.
 Israeli banks also have branches abroad. This section refers only to the number of branches operating in Israel (excluding operations units and representative offices of main branches).
 In addition to banks’ automated teller machines, there are devices belonging to nonbank corporations, including Shva (the Hebrew acronym for Automated Banking Services Ltd.)
 “Mixed municipalities” was defined as municipalities in which the Arab population is more than 10 percent of the total. Based on this definition, “mixed municipalities” include Haifa, Jerusalem, Lod, Maalot-Tarshiha, Nazereth Ilit, Acco, and Ramle.