TSB is investing in bank branches, not closing them

TSB is countering the industry trend of branch closures in the light of increased digital services by opening 30 new branches

TSB is countering the industry trend that has seen hundreds of bank branches close in the light of increased digital services, by opening 30 new branches and refurbishing 265 existing ones.

The bank, which has more than 600 branches in the UK, is putting them at the centre of its multi-channel strategy.

In contrast, many major high street banks are closing branches, citing changing customer habits with the move to online banking as the reason. Digital developments, such as software to allow customers to pay in cheques via their smartphones, demonstrate how technology is reducing the need for customers to visit bank branches.

But in a report entitled Why branches matter in the digital age, TSB CEO Paul Pester said banks shouldn’t be deciding between branches or technology, but investing in both.

“Some argue that because technology and innovation is revolutionising the way in which customers interact with their bank and money, that’s the only way to compete, and that emerging digital-only providers – be they from the banking industry or elsewhere – will make branches redundant,” wrote Pester. “The steady flow of bank branch closures by the major established banks over recent years has given that theory an air of credibility.”

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, replacing them with digital technology. It will close 57 branches as part of its cost-cutting plans, leaving it with 165 (about one 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 taken aback.”

RBS said its mobile banking app is its biggest branch. More than 167,000 RBS and NatWest customers use it between 7am and 8am on their commute to work every day.

But TSB research paints a different picture of the high street bank. It found that the bank branch was the most used channel, with 36% of customers only using branches of the bank, 22% using online only and 2% using just telephone banking. Some 24% use a combination of branches and online, while 7% use all three channels.

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The TSB study also found that 88% of personal banking accounts were agreed, 85% of mortgages were applied for and 71% of personal loans were taken out in branch.

A document from the British Banking Association to members, which was recently 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 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.” 

Santander chairman Ana Botín agrees that traditional banking services are an advantage. In an interview with the Financial Times, she said the bank is investing in digital technologies but is not soley focused on that, with traditional banking services, such as those provided in branches, key to banks staving off competition from internet giants.

“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.”

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