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Determination of New Bank Branch Location Using GIS Approach

Article · March 2016

DOI: 10.1007/978-981-10-0534-3_19

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Noorsazwan Ahmad Pugi Halmi Zainol

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Chapter 19
Determination of New Bank Branch
Location Using GIS Approach

Noorsazwan Ahmad Pugi, Halmi Zainol and Azlizan Adila Mohamad

Abstract In business, location of the premise plays an important role in ensuring

the success of the business. It is important in terms of the business marketing and
profit. The location of the competitors also should be taken into account. With the
growing needs for computer-based system, geographic information system
(GIS) can be utilized to determine the suitable location for business purpose
including new bank branch location. This paper has summarized the method to
carry out the research to determine the best location to place a new branch for
Bank X, particularly in Shah Alam, Selangor. The process can be divided into three
stages; planning, implementation, and decision stage. The planning stage was
focused on the data methods and analysis to be used in this research. For the
implementation stage, geospatial database was created and all required data for
decision stage were prepared. In the decision stage, the location of new branch of
Bank X was investigated based on the suggested criteria from the bank itself and
location of other banks. Spatial modeling and Euclidean distance methods were
used to obtain the desired decision. The results showed four suitable locations for
new bank branch of Bank X; location near Stadium Shah Alam, location at Pusat
Perniagaan Worldwide, location opposite Sek. Keb. Seksyen 7, and location behind
SRJK Tamil Seksyen 7. Ranking technique was used in order to get the most
suitable location from those four locations and the most recommended location was
the location opposite to Sek. Keb. Seksyen 7. For the conclusion, GIS technology is
a useful and powerful tool in planning and decision-making purpose.

Keywords Euclidean distance
GIS
Suitable location

N. Ahmad Pugi (&)
H. Zainol
A.A. Mohamad

Faculty of Architecture, Planning and Surveying, Universiti Teknologi MARA,
Seri Iskandar, Perak, Malaysia
e-mail: noors240@perak.uitm.edu.my
H. Zainol
e-mail: halmi461@perak.uitm.edu.my
A.A. Mohamad
e-mail: azliz1122@perak.uitm.edu.my

© Springer Science+Business Media Singapore 2016 201

N.A. Yacob et al. (eds.), Regional Conference on Science, Technology
and Social Sciences (RCSTSS 2014), DOI 10.1007/978-981-10-0534-3_19

halmi461@perak.uitm.edu.my
202 N. Ahmad Pugi et al.

1 Introduction

Determining strategic new bank branch location is one of the important elements in
marketing a business expansion. Finding the best new location for business
expansion is really a challenging task. It requires substantial capital investment and
with so much money on the line, management wants to make sure that they have
selected the right expansion site (Jafrullah et al. 2003). With the growing needs for
computer-based system, GIS can be utilized to determine the suitable location for
business purpose including new bank branch location. GIS is masterful at analyzing
hundreds of variables to quickly identify the top sites for consideration. GIS helped
us to quickly obtain a snapshot in understanding of all markets from a remote
location (Anthony 2007).
This paper is about to determine the best location for establishing new Bank X
branch in Shah Alam City Center region which includes Seksyen 1 to Seksyen 14
by using the advancement of geographic information system (GIS) technology.
This is because this area consists of two Bank X branches only and were predicted
that it could not support the capacity of customers, mainly from Shah Alam city
center residence due to the rapid development. Banks can use GIS-based solutions
to ranks service area within market according to viability for the concept. Based on
the bank’s criteria, the analysis can consider competition, demographics and other
concept factors to help prioritize options.

2 Data Layers and Sources

The base map used to fuse all available data sources is based on Shah Alam landuse
digital map provided by Majlis Bandaraya Shah Alam (MBSA). This map has been
registered via some ground control points based on Malaysia Rectified Skew
Orthomorphic (MRSO) projection. This digital map provided all information about
boundaries and all related information on blocks, sections, and villages.
The resultant of the above solution is the following list of the layers: Shah Alam
Sub-districts, major and minor streets layers, banks, commercial areas including
restaurants, hotels, gas stations, and police stations.

3 Bank Location Criteria

The suggested criteria by the bank to locate new bank branch location are as
follows (Jabatan Perbankan Cawangan 2008):
1. Area with the population about 10,000 people
2. The location should be in trading area such as supermarket or malls that could
develop a business matter in that area.

halmi461@perak.uitm.edu.my
19 Determination of New Bank Branch Location Using GIS Approach 203

3. The maximum area coverage must be within 3 km from existing branch.

4. Must be located in the area that avails security, business establishments, and
infrastructure support such as accessing road.

4 Implementation and Resultant Maps

For the methodology of this study, it was carried out as shown in Fig. 1. It was
divided into three phases: planning stage, implementation stage, and decision stage
(Figs. 2, 3 and 4).
Planning stage was focused on the creation and development of the GIS data
model. It is also used to determine the criteria of suitable location for the new
branch to be located. Besides that, it was also involved the decision to apply which
method and analysis to be used in decision stages. For this research, the analysis
method to be used is using Euclidean distance method. This method is supported in
the ESRI’s software that is ArcGIS.
Implementation stage discussed the building of geospatial data layers and the
GIS data model implementation. This is the stage that GIS data model be built and

Fig. 1 Methodology chart

halmi461@perak.uitm.edu.my
204 N. Ahmad Pugi et al.

Fig. 2 Buffer of existing banks (competitors)

Fig. 3 Buffer of commercial area

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19 Determination of New Bank Branch Location Using GIS Approach 205

Fig. 4 Analysis workflow

implement. It was started from registering the input data (particularly the digital
map) into Malaysia Rectified Skew Orthomorphic (MRSO) projection. Then, it
followed by digitizing the road layers and other points of interest such as banks
features. After that, the attribute of those features in the map were created on the
particular features. Finally, it produced the final map that will be used for analysis
process (decision stage).

Fig. 5 Overall suitable location (Bank X and commercial area analysis process)

halmi461@perak.uitm.edu.my
206 N. Ahmad Pugi et al.

Fig. 6 Overall suitable location (Bank X and competitor’s analysis process)

In the decision stage, it discussed the analysis that is being carried to determine
the suitable location for new Bank X branch. In this stage, there are two types of
investigation that have been carried out. They are
1. Based on bank X itself (no competitors were considered)
2. Based on other banks as a competitors
There are two basic processes involved in order to locate the suitable location for
new Bank X branch; buffering and model builder.
After implementing the workflow (as mentioned above), the result obtained is
shown in Figs. 5 and 6.

5 Data Analysis and Results

Based on the resultant map, in order to determine which location is the most
suitable site to locate a new Bank X branch, a ranking classification was con-
structed. The analysis was carried out based on certain factor such as population,
type of commercial area, accessibility, parking lots, and other factors including area
potential and security of safeness. The result was discussed into two parts; result
from Bank X and commercial area process and result from Bank X and competitors
process.
From the resultant map, the location can be assigned as A: location near Stadium
Shah Alam, B: location at Pusat Perniagaan Worldwide, C: location opposite to

halmi461@perak.uitm.edu.my
19 Determination of New Bank Branch Location Using GIS Approach 207

Table 1 Total ranking Result (location) Total ranking suitability

locations’ suitability
A 5 + 3 + 2 + 2 + 2 + 5 = 19
B 5 + 3 + 2 + 2 + 2 + 5 = 19
C 4 + 4 + 2 + 2 + 1 + 6 = 19
D 4 + 1 + 1 + 1 + 1 + 5 = 13

Fig. 7 The most suitable location based on ranking suitability (overall)

Sek. Keb. Seksyen 7 and D: location behind SRJK Tamil Seksyen 7. Since the
result in Bank X and competitor analysis process was same as C and D, therefore it
used the same category C and D.
Table 1 shows the total ranking suitability obtained from those locations. The
most suitable location was Location C due to its maximum value in the total
ranking suitability. Furthermore, this location is obtained after the result through the
investigation in the decision stage (Fig. 7).

6 Conclusion and Recommendations

As a conclusion, the objective of this study was successfully achieved. Four rec-
ommended locations for new Bank X branch location was successfully determined
by using GIS as a tool for decision-making. This was supported by the use of
Euclidian distance analysis method in order to investigate the location based on the
existing Bank X branch location and other banks location as a competitor. Finally,
total ranking suitability was used in order to determine the most recommended
suitable location for new Bank X branch location.

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 208 N. Ahmad Pugi et al.

There were some recommendations that can be highlighted from this study. In
order to maintain the accuracy and make the data more global, base map of Shah
Alam needs to be updated. Additional information such as land costs, building
availability and suitability, construction costs, local and state taxes, local and state
development incentive, availability and cost of energy, transportation availability,
availability of infrastructure such as telecommunications, sewer, and water can be
included in order to get more information about the features. Banks and other
commercial sectors in Shah Alam should organize their effort to build one
geospatial database infrastructure that can be utilized by all and at the same time can
be published via internet for public use.

References

Anthony L (2007) STL released integrated GIS solution for Nigeria’s Banking Industry. http://
www10.giscafe.com. Accessed 7 July 2008
Jabatan Perbankan Cawangan, BSN (2008) Penggunaan Kriteria ‘Standard’ Bagi Perlaksanaan
Penubuhan/ Penutupan/ Pemindahan/ Percantuman Cawangan-Cawangan BSN
Jafrullah M, Uppulurim S, Rajopadhaye N, Reddy VS (2003) An integrated approach for banking
GIS. InfoTech Einterprises Limited

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