Gareth Shaw: We're not ready for a world without bank branches

It was only a few weeks ago that I wrote about the closure of bank branches, and my first-hand experience of seeing the impact of closures in rural areas.
Banking on the move has been a major factor in the number of branches being shut, with the Royal Bank of Scotland responsible for 350 closures since 2015. Picture: GettyBanking on the move has been a major factor in the number of branches being shut, with the Royal Bank of Scotland responsible for 350 closures since 2015. Picture: Getty
Banking on the move has been a major factor in the number of branches being shut, with the Royal Bank of Scotland responsible for 350 closures since 2015. Picture: Getty

Well, the issue is back in the news, thanks to Which?. We’ve just conducted the most comprehensive analysis of bank branch closures that exists, collating data on every single branch closure from 20 national banking and building society brands since the beginning of 2015. What’s more, our data has been verified by each provider, meaning we now hold a truly accurate picture of today’s bank branch landscape.

And the result? Banks have been closing down at an alarming pace, a rate of 60 per month since the beginning of 2015.

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By the end of this year, some 2,868 branches will have closed in four years, dramatically reducing the number of banks we find on our high streets across the country.

Scotland has been worst hit, losing 368 branches, largely driven by 150 Royal Bank of Scotland closures and 86 Bank of Scotland closures. But there have been hits to areas south of the Border – the North West of England has lost 353 branches, the South East has seen 361 branches close.

NatWest stands out, perhaps as you would expect given that it is one of the biggest banks in the UK, as the brand with the most closures – it has shut, or is due to shut, 638 branches by the end of 2018. HSBC has closed 440, Lloyds Bank 366. Royal Bank of Scotland has closed 350, while Barclays has shut down 243.

Why has this been happening? Since I last wrote on this topic, we have even more information about how people’s banking habits have been changing. Data from UK Finance, the trade body that represents the banking industry, suggests that 71 per cent of adults, equivalent to 38 million people, logged into online banking last year.

Close to 22 million people used mobile banking apps, and there were around 5.5bn log-ins to apps last year.

Meanwhile, the average branch received 104 visits a day in 2017, compared to 140 per day in 2012. This represents a 26 per cent fall in bank branch visits.

Banks and building societies say that this has been the main driver of closures. Customers’ banking habits are changing, and branches are needed by fewer and fewer customers.

I spent quite a lot of time discussing the issue with journalists on radio and TV when we published our research. The challenge I constantly received – rightly so – is to argue why banks should not close their branches when people aren’t using them as much any more.

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They are, after all, private companies who are taking commercial decisions, and banking is not a public utility – they have no obligation to keep their branches open.

I don’t disagree with any of these arguments – I’m not a luddite trying to fight back against the digital revolution. But it is clear that the entire country is not ready for a world without bank branches, and there is a genuine risk of people being financially excluded by this rapid reduction in branches across the land.

This week, the Financial Conduct Authority published the results of its second survey into the financial lives of people in the UK. It found that in rural parts of the country, just 23 per cent of people used mobile banking, and 54 per cent used online banking, compared with 45 per cent using mobile apps, and just shy of 80 per cent using online banking, in urban areas.

Poor broadband speeds, non-existent mobile coverage and a higher proportion of older people in rural areas will be the reasons for this. But it strengthens the view that there are a significant number of people who are not able to adapt to the radical changes in the way the majority are banking today.

Yes, there are alternatives – 99 per cent of retail banking customers can pay in and withdraw money at 11,500 Post Offices around the country, as well as checking balances. RBS Group and Lloyds Banking Group offer mobile banking vans, visiting communities once a week, as well as banking staff deployed in local shared spaces. These are all helpful – but are they an adequate replacement for the services provided by a local branch? And what will be the long-term effects of villages and towns with no branches at all? We simply don’t know.

The chief executive of the FCA, Andrew Bailey, said that the regulator’s research showed “just how different the experience of financial services is for consumers across the country” and how the results would shape the work that the regulator does.

He also added that it was “important for firms, as they decide how best to serve their customers”. That’s the vital thing here – it’s clear that while we’re on the trajectory for digital banking, there are customers at real risk of being left behind.

Gareth Shaw is head of Which? Money Online