ROYAL Bank of Scotland admitted a few months ago that it made a mistake in 2010 when it pledged to keep branches open if they were the last in town.
In a way it’s quite touching that the bank thought anyone would believe anything they said. But will the bank one day regret abandoning its pledge so easily?
Asked at the AGM in May to justify the removal of the pledge, chairman Philip Hampton said it should never have been made in the first place. Funny that. He was chairman when it was made.
And if Hampton didn’t anticipate branch visitor numbers falling sharply over the coming years then he clearly wasn’t paying attention. A decline in footfall has long been used as an excuse to cut costs by shutting branches.
Barclays announced back in 2000 that it was closing more than 170 branches because “a large number of customers are changing the way they choose to bank with us”. The ensuing backlash persuaded the other banks to put their own branch closure programmes on hold for a while.
Then in 2005, Clydesdale decided to shut some 60 branches north of the Border, including its entire network in the north-east of Scotland. In stepped RBS to buy its branch in New Deer, Buchan, claiming it had “always recognised the importance of investing in and supporting rural communities”.
That intervention was in 2006, the year an Economist Intelligence Unit report said banks were “waking up to the fact that their branches are not just cost centres but sources of new business and potential profit”.
It pointed out that HBOS, HSBC, Northern Rock and Santander-owned Abbey were all investing in their branch networks. Those very names attest to the change and turmoil of the past decade.
One thing that’s clearly different to 2006 is the attitude of high street banks towards branches that aren’t sufficiently profitable. It’s a shift that’s happened since the PPI gravy train so spectacularly left the tracks, depriving banks of a lucrative source of profits (ie mis-selling proceeds).
Their investment in digital – and the rise in the number of people banking online and through mobile devices – has reduced footfall in branches and bolstered the case for closures. RBS wants – expects, even – its customers to bank entirely online. After all, RBS has proved such a reliable provider of online banking, hasn’t it.
Yet branches remain a lifeline for more (individual and business) customers than you might expect, particularly those without digital access or who are unable or unwilling to conduct their financial affairs online.
The banks all claim they’re investing in “customer needs” and RBS makes a big play out of its mobile banking services. So why won’t they explore the shared banking centres model? The reality is that co-operating with other banks is anathema to them, even when it’s clearly in the best interest of customers and, arguably, their own brand reputation.
The watered-down version of the RBS customer charter starts with the pledge to “put our customers’ needs first”. How long until it admits to failing on that measure too?