Are branches the centre of your community?

Financial Services Team Blog

Lynn Tweedale

Research was published this week by Nottingham University stating that the UK has lost 40% of its banks and building societies since 1989.  Whilst the bulk of these were in the last millennium, and the rate in the last 6 years has slowed to a 7.4% decline, it’s certainly re-energised the branch as the centre of the community debate.

With the report hitting national as well as trade press (and at least 4 people emailing me about the article) I can’t help but wonder – so what?

With internet banking and mobile apps now the norm, when was the last time I needed to visit the bricks and mortar banker?  Admittedly, a few weeks ago to pay in my premium bonds win cheque (nothing exciting unfortunately) – but even then I was ushered to an ATM to self-serve.

From our research, just over a third of people say they go into a branch to talk to staff at least once every 3 months, and just over half will go to a branch to withdraw or deposit cash or cheques during the same time period – a service we know is moving to ATMs.  Conversely, a more sizeable three-quarters have used online banking to check balances, and two-thirds have made online payments.

The report’s author, states that there are concerns of bank closures on poorer communities, where “branches in less affluent areas have continued to disappear at an alarming rate”.

Of course, there are times when it’s nice to speak to someone face to face – especially if it’s a topic of uncertainty, or you’re not as technically savvy or best friends with your phone.  However, I can see why branches in less economically viable areas have been closed in favour of those where branches are more profitable.  Business is business after all.

With The Payments Council’s ‘Current Account Switch Service’ coming into action in September, some banking brands could use this as an opportunity to encourage switching in less affluent areas to their bank that has remained local – if this is deemed at all profitable.   Or there could be an argument for a government subsidy to support branches in particular areas, as is currently the case with some public transport routes.

The report also, however, commented that fewer branches in low income areas could encourage people to take up payday loans instead.  A point with which I disagree.  Why would the absence of a physical branch encourage the take up of popping into The Money Shop or moving Wonga’s sliders?  High street or online loaners are more likely to be the first calling point as banks are not keen on subprime lending or offering short term loans.

It’s also recently become evident that the Archbishop of Canterbury is also hot on the heels of the payday loaners, with the intent of competing them out of existence by rejuvenating credit unions.  With the church having more than 16,000 ‘branches’ in 9,000 communities (more than all banks and building societies together), it’ll be interesting to see if the local community presence wins.