Digital cheque processing could prove fatal blow to hundreds of bank branches

Banks have reneged on their promise to keep bank branches open, blaming changing consumer habits and digital technology

Bank branches are shutting across the country as banks renege on their promise to keep branches open, blaming  changing consumer habits and the move to digital technology.

Digital developments, such as software to allow customers to pay cheques in via their smartphones, demonstrate how technology is reducing the need for customers to visit bank branches.

A document from the British Banking Association to members, which was a leaked to the Sunday Times, revealed that banks will not commit to ensuring the last bank in town stays open. Reports claim more than 500 branches across the UK could close this in 2015.

The leaked document said: "Decisions on branch closures are ultimately commercial decisions. After a bank has decided to close a branch, the firm will engage with key local stakeholders to understand the potential impact on the community.” 

Smartphone cheque payments

A Computer Weekly survey of IT industry professionals found the main reason most people go to the bank is to pay in cheques. But recent announcements from Barclays and Lloyds Bank, of apps that enable people to pay in cheques using their smartphone, could mean this might not be the case in the future. The next most common reason was to transfer money.

On average survey respondents visit a branch on average once every six months.

Almost all believed that branches would never disappear completely. Those that did not use mobile banking apps cited security fears as the reason for not doing so.

The Royal Bank of Scotland (RBS) and the Co-operative Bank provide recent examples of companies announcing branch closures. The Co-operative Bank is closing about a quarter of its remaining branches and digital technology will replace them. It will close 57 branches as part of its cost-cutting plans, leaving it with 165 (about 1 per 8,500 customers), but aims to retain service levels through IT. The bank said it was responding to changes in the way customers bank.

Meanwhile, RBS will close another 99 branches. A senior executive at the bank told a House of Commons committee that hundreds of millions of transactions, previously completed in branches, have moved online. “We are seeing a revolution in the way our customers want to bank,” Moray McDonald told the committee. “We have been literally taken aback.”

He said the bank had identified 99 branches for closure, but said this figure could change. In April 2014, the bank announced the closure of 44 branches in the UK after a 30% fall in the number of transactions made in branches. In a recent announcement about mobile banking and fingerprint authentication, RBS said the mobile banking app was its biggest branch. More than 167,000 RBS and NatWest customers use it between 7am and 8am on their commute to work every day.

Digital banking advances

Meanwhile Barclays is arming community bankers with iPads featuring an app that can carry out all the transactions that occur in a branch. An iPad and Wi-Fi or 3G connection is used to connect to the service which will enable them to carry out money transfers, changes to personal details or account openings, among other things. The bank will roll it out across the UK in summer 2015. 

Barclays also accepts photo documents to be included in mortgage applications online and Nationwide Building Society carries out mortgage consultations via videoconferencing technology.

But branches are unlikely to disappear completely. In fact, some see them as an advantage.

Santander chairman Ana Botín recently insisted bank branches have value, even if far fewer people visit them. “The fact is, even young people like to go to a branch at least twice a year. That means you need quite a significant retail presence,” she said.

But she said online services are not for everything and banks should remain focused on traditional services, such as in-branch consultation. 

“At important times in your life, you want to see a person,” said Botín. “You are not going to get married through technology. You are not going to buy a house through technology. I think that is where we are going to compete very effectively with these guys, if we can find a model that combines the personal side with the technology.” Santander has 14,000 branches in the UK, US, Latin America and continental Europe.

Some challenger banks also see the branch as vital. Lintel Bank, which is currently applying for a UK banking licence, plans to have branches and telephone services. “We are as much digital as the other challenger banks, but also provide a branch and telephone service to provide a quick and easy method of resolution of customer concerns,” said the bank’s creator, Nazzim Ishaque. Lintel Bank is likely to be based in London, with branches in the city before expanding to other areas.

Sainsbury’s bank is also planning to open branches in stores as part of a layout refresh and, in 2012, Barclays gave 8,500 Apple iPads to staff in branches to improve interaction with customers.

Some banks are breathing new life into branches. For example, Bank of Tokyo Mitsubishi UFJ is using 58cm tall robots in the front office to help customers.


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