Bank branches – do we still really need them? Fewer and fewer people are using them, the data seems to tell us, and the number of people carrying out their banking business online or on their phone rises every year.
Post offices across the country now offer basic banking services, and they easily outnumber the bank branch network. These are complemented by community bankers in local areas and a crop of mobile banking vans visiting communities in areas where branches have disappeared.
And given that fewer people are using cash and switching to digital and contactless payments, isn’t the idea of a physical shop to do your banking business just an antiquated idea?
These are all fair questions to ask. But the latest research from Which? suggests that customers say they still use branches – and are not enthusiastic about the alternatives that are being offered up.
Figures uncovered by Which? last week show there are just over 7,500 bank branches left in the UK – down from around 20,000 some 30 years ago. In recent years, the pace of branch closures has accelerated, to some 60 a month closing their doors for the last time.
A fifth of households in the country now live more than three kilometres away from their nearest branch, and many large communities have been left without a single banking outlet. Baldock, in Hertfordshire, with a population of more than 10,000 people, saw its last branch disappear a year ago. Muir of Ord in Marybank and Strathconon, with 4,516 people, lost its last branch in 2015, and has been without a Post Office for two years.
Indeed, sparsely-populated parts of Scotland account for the top 70 communities furthest from a bank branch.
While overall branch use is in decline, most people still use physical branches. Almost nine in ten (86 per cent) told us they’d visited a bank branch at least once in the past year. When we asked about the impact of branch closures, eight in ten (83 per cent) said branches should stay open for those who are unable or unwilling to use alternatives, while three-quarters (77 per cent) said we need branches in case there are technical problems with digital alternatives.
These concerns are fair – a red-faced TSB locked up to 1.9 million online and mobile customers out of their accounts following a botched IT upgrade earlier this year, while other major high-street banks have all experienced outages in recent months. An influential committee of MPs is now investigating these IT problems.
The fact of the matter here is that banks are not public services – they are commercial businesses who must balance the needs of their customers with that of their shareholders. If a branch becomes uneconomical because it’s not being used, any smart business would and should assess its ongoing viability.
That is, of course, if the alternatives that the banks are funding are fit for purpose. And at the moment, customers don’t believe they are.
There are more than 11,500 post offices around the UK, and for almost two years high-street banks have been paying the Post Office to let small business and personal current account customers access over-the-counter services.
Yet our research found that only 55 per cent of adults are aware that they can use post offices for banking, and 47 per cent are unlikely to do so in the future.
Post Office banking is limited to basic activities: checking your account balance, withdrawing money, paying in cash and cheques (you’ll need a paying-in slip from your bank). The list of what you can’t do is substantially longer – whether transferring money from your account or seeking advice and making enquiries about savings, current accounts, credit cards and mortgages – all things people use branches for.
When we asked people who are unlikely to use the Post Office for banking to explain their reluctance, six in ten said they simply prefer to deal directly with their bank. And more than a quarter were worried about staff lacking expertise in financial services. Others voiced concerns that post offices have long queues and aren’t private enough to deal with personal finances.
With only 262 directly managed Crown branches left, an increasing number of post offices are situated inside newsagents, convenience stores and retailers. And the number of mobile outreach services – which are hosted in vans, village halls and local pubs for a few hours each week – has soared from 938 in 2010 to 1,518 today.
This goes some way to explaining the perception that post offices aren’t always suitable for financial transactions. A solitary counter in a corner shop or the local boozer isn’t many people’s idea of a private or personal service, not to mention a potential barrier to those who rely on car parking spaces, wheelchair access or seating, which smaller retailers are less likely to have.
There’s no denying that the way we bank and pay for things is changing radically, but the decision to remove physical services, be they branches or ATMs, is currently being made by the private sector with the economics of provision in mind – not necessarily the societal consequences.
Which? is trying to fuel the debate about this to ensure people don’t get left behind. And it’s a debate we need to have now, before the majority of communities are left without the essential financial services they need in life.
Gareth Shaw is head of Which? Money online