The banking industry and government have reached a compromise on rural branch closures as digital banking decimates the use of traditional services. The deal will not guarantee the survival of the last branch in town, but it will ensure there are alternatives.
The government and banks – through industry body the British Bankers Association (BBA) – have agreed on a set of rules that means the last bank branch in town might close for some communities, so long as there are alternative means of banking.
The agreement aims to guarantee support for customers using the internet or mobile banking, ensuring that Post Office branches provide equivalent services. In the same way that consumers can withdraw cash at any ATM, the Post Office could offer white-label banking services to customers.
The agreement commits banks to: “Work with local communities to establish the impact of the branch closure, prior to its closure; find suitable alternative provision to suit individual communities; and put satisfactory alternative banking services in place before a branch is closed.
"Options for this will include free cash machines, the proximity of alternative branches, and Post Office branches and mobile banking arrangements.” This will be reviewed by an independent reviewer after one year.
Read more about the bank branch debate
- 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.
- Payment provider Advanced Payment Solutions (APS) has signed an agreement to allow its customers to access banking services in 11,500 Post Office branches.
- 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.
- Post Office could be the Carphone Warehouse of banking industry.
Cheque app spells the end for branches
Business secretary Vince Cable said: “People are increasingly banking online, but it’s not necessarily an option for everyone and we must ensure people are not left behind. This industry agreement recognises those concerns, commits to finding alternatives and is a major step forward.
"The next stage is for the banks to reach a commercial agreement with the Post Office to improve the facilities for small business customers, so that they can get a consistent level of service like consumers.”
A recent Computer Weekly snap survey of IT industry professionals found the main reason most people go to the bank is to pay in cheques. But Barclays bank and Lloyds Bank have recently announced apps that enable people to pay in cheques using their smartphone.
The next most common reason was to transfer money. On average, survey respondents visit a branch on average once every six months and almost all believed branches would never disappear completely. Most of those who did not use mobile banking apps cited security fears as their reason.
Anthony Browne, CEO at the BBA said: “The way we bank is changing, with millions of us now embracing a range of digital services to spend, move and manage our money. Because of this change in customer behaviour, banks are investing more heavily in innovative technology to make banking quicker and more convenient. This means the number of branches is falling.”
Bank branch closures gather momentum
“Communities will be given fair notice of any closure and clarity about the alternative places and ways to bank. This includes the Post Office, which is an ideal shared service for customers who prefer to use counter services. The agreement will also make sure there is the right support to help customers use internet or mobile banking.”
The Royal Bank of Scotland (RBS) and the Co-operative Bank have recently announced 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 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, head of personal and business banking products at the Royal Bank of Scotland (RBS), told the committee. “We have been literally taken aback.”
He said RBS 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.
In contrast TSB – before it was acquired by Sabadell – said it would invest in branches, with 30 new branches and 265 existing branches refurbished. 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.