Deal close with banks to maintain services in remote locations

The government is close to agreement with the British Bankers Association on a set of rules for banks to follow before closing branches

The government is close to agreement with the British Bankers Association (BBA) on a set of rules for banks to follow before closing branches, and has acknowledged the challenge that banks face to balance physical and digital services.

Speaking at a Liberal Democrat fringe event, business secretary Vince Cable (pictured) said the deal is expected to be signed within days, setting out measures that banks must take to ensure alternative banking services are available for communities that are losing their last branch, reports the Wolverhampton Express and Star.

"We hope that actually within the next week... we will have made an agreement with the BBA on behalf of the banks about how you can deal with the last branches in towns, because there are some communities that should not just be abandoned – that would be completely wrong," said Cable.

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

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

Cable acknowledged the difficulties facing banks, which are losing a "large number of physical customers" as people move to online services. "What we are trying to reach is an agreement that they [the banks] have to go through certain stages when a branch is faced with closure, a proper consultation process, but, crucially, making sure there is an alternative – that individual bank depositors and small businesses should have an alternative."

Cable said Post Office branches could be used as an alternative location for banking services. "What we want to use for that is the post office network," he added.

Read more about the future of bank branches

Post Office branches, of which there are 11,500 across the UK, as seen by online-only banks as an alternative to setting up their own branches. Last week, payment provider Advanced Payment Solutions (APS) signed an agreement to allow its customers to access banking services in Post Office branches. 

This follows a major IT project between the two organisations. Business and consumer users of APS’s digital current account service, Cashplus, can withdraw cash in real time and make instant balance enquiries at Post Office counters. APS also provides lending and prepaid credit cards.

Last month, a document from the BBA to its members, which was leaked to The Sunday Times, revealed that banks would not commit to ensuring that 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.” 

The Co-operative Bank is closing about a quarter of its remaining branches, to be replaced by digital technology. It will close 57 branches under cost-cutting plans, leaving it with 165 (about one per 8,500 customers), but it aims to maintain service levels through IT. The bank said it was responding to changes in the way customers bank. 

Meanwhile, RBS intends to close a further 99 branches. A senior executive at the bank told a House of Commons committee that hundreds of millions of transactions that were 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.”

However, TSB is bucking the industry trend of closing branches by opening 30 new branches and refurbishing 265 existing ones. TSB research found that branches were its most-used channel, with 36% of customers using only branches of the bank, 22% using online only and 2% using telephone banking only. Some 24% of TSB customers use a combination of branches and online, while 7% use all three channels.

TSB is not alone in valuing its branch network. NatWest said its branches in Shoreditch and Moorgate were being refurbished to serve customers better and if the east London branch refits are successful, they will be mirrored in 300 other branches.

Banks are finding themselves under more competitive pressure than ever as scores of new banks are given approval to operate by regulators and technology firms set their sights on the lucrative market of payments and information enrichment services. Banks' decisions on their branches will be critical in helping them to differentiate.

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