Bank branches are closing at a rate of knots. According to Which? the UK has lost more than two thirds of its bank branches in the last 30 years, and more than 1,800 have disappeared since January 2017. There are seemingly logical business reasons for closing them: banks say the rise of online banking has decreased footfall and made them uneconomical; RBS say for example that mobile transactions have increased by 73% and branch customers have fallen by 40%. But with so many local branches closing, there’s no easy way of. getting around the fact that there are a significant number of people who are finding it increasingly difficult to access financial services. Up to 1,500 UK towns no longer have a high street bank and for people who don’t want to move to online banking this presents a problem. Elderly people are particularly vulnerable, they are much less likely to be comfortable with carrying out their banking online and may be left with no choice but having to travel for miles to get to a physical branch. Then there’s the problem of cashpoints. When banks leave, taking their free ATMs with them, towns can end up left with only the option of charging a couple of pounds for each withdrawal – a particularly brutal and demoralizing state of affairs for those on low incomes and benefits. Or they can be left with none at all.

There’s a perception that it’s only older people who use bank branches, but Cashing out, a 2019 report by the RSA, finds that ‘banks are not just for older people’, with one in three 18-34 year olds being regular branch users and 25-44 year olds more likely to deposit cheques or cash face-to-face in a branch than those over 64. And it’s not just individual customers that suffer from the loss of banks. The report says that branches (and cash) should be protected in order to support local economies, high streets and small businesses. Branch closures, it goes on to say, appear to reduce SME lending, which in turn can damage employment, productivity and growth. And many people still want to be able to go to a physical bank. The RSA’s report said that 90% of people felt that branches still have a key part to play in terms of providing financial services, but that their role needs to be ‘reinvented’.

Blame it on the banks
Bank closures are also picking up some of the blame for the ‘death of the high street’. In a survey for the Nottingham Building Society, 46% of shop owners said that the closure of their local bank had harmed their business, with revenue dropping by an estimated 20%. 31% were considering becoming online-only businesses, others: moving into smaller premises or changing location (26%). In terms of consumers, 36% said that once their local bank branch closed, they would make fewer visits to their town or village high street. Of course, there are many different factors causing problems on the high street, with the rise and rise of internet shopping being one, and the government’s restructuring of business rates being another. But there’s no doubt that when the banks move out there can be a profound effect on the local community.

Banks are keen to point out that ‘everyday banking’ – paying in and withdrawing money – is available through post office branches for all the major banks, but the news isn’t entirely reassuring there either. Many post office sites have been lost over the last few years, and MPs have recently been warned that thousands more branches are at risk from closure. In addition, 59% of respondents to a Which? survey said they would always prefer to deal directly with their bank than go through another service.

There’s no doubt that the rapid rate of bank branch closures is causing, and will continue to cause, problems for both businesses and consumers. It seems there’s a tension between what makes commercial sense and the intentions of banks to be seen as customer-centric in the most basic sense of the word. Particularly when those customers live in rural, less densely populated or poorer areas and struggle with online banking or need services that can only be delivered face-to-face. Ceri Stanaway, Which? Money Editor, said “We want to see banks properly justifying the reasons for closure and taking into account their customers’ needs before shutting their doors – and their customers out.”

It’s a conundrum for the banks to solve but solve it they must. The Parliamentary Treasury Committee’s May 19 report has stated that it’s ‘no longer an option for banks to ignore financial inclusion’, in the words of the Committee’s Chair Nicky Morgan. The committee has called for banks to have a legal ‘duty of care’ towards customers which would include maintaining a branch network.

Alternative bank branches
Some banks are trying out new strategies. Metro Bank already has three UK ‘drive-thru’ branches, where customers can deposit and withdraw money from their cars, with cashiers available behind windows like a high-tech motorway tollbooth. Future drive-throughs could have cashiers via video link rather than needing to be physically present. But they’re only useful for car-owners, so though some people expect to see more of them, they may never capture the UK imagination in the way that they have in car-obsessed America.

Mobile banks – in the four wheels sense – are currently run by Lloyds, NatWest and RBS. Based in large vans, they travel around set routes not served by bricks-and-mortar branches over the course of a week, stopping off for an hour or so at regular designated times. These branches work in the same way as 'normal' banks, offering many of the same services, and are one way of solving the problem of closures, though currently they seem to operate in quite an old-fashioned way. Customers can deposit and withdraw cash, pay bills and even order foreign currency, as well as getting help connecting to other services. Staff report that many of their customers, who they often know well, don’t want to switch to internet banking and they serve and support local communities in other more human ways, for instance an article on NatWest mentions mobile staff celebrating a customer’s 80th birthday.

As traditional branches close, the digital banks move in…
There are a number of reasons why banks shouldn’t be too hasty about closing branches down. The open banking initiative has made it easy for customers to switch to competitors and they still value local branches and ATMs highly. In a Deloitte report 68% of respondents said proximity to branches and ATMs is important or very important in choosing their main bank. Deloitte found that customer satisfaction is more greatly influenced by the branch experience than online or mobile channels. And in turn highly satisfied customers are less likely to switch their main bank and more likely to recommend it to others. Mark Aldred, banking specialist at software innovation house, Auriga, warns that banks who close too many branches will find that “there’s a risk that they will realize that we need them after they’ve been removed, and [branches will be] expensive to reinstate. In addition, McKinsey found that using technology to enhance the in-branch experience can result in a 60-70% improvement in branch effectiveness, in terms of cost savings and increased sales. So perhaps banks need to look at their branch strategies again.

And there’s another reason why traditional banks need to have a rethink about closing branches and abandoning some towns. Two pure digital players have already come up with ways to put themselves in bricks-and-mortar locations and It’s not impossible that more may come in to solve the problem for customers, by coming up with new strategies allowing them to creep into the very areas the traditional players have walked away from, perhaps taking advantage of cheaper rents or other incentives designed to reinvigorate dying high streets. If the digital banks can show themselves to be as community-minded in physical environments as they have been in online spaces, traditional banks should be worried.

Challenger bank Starling announced a partnership with the Post Office in November 2018, making them the first mobile bank to join its Everyday Banking roster. Starling Bank’s CEO, Anne Boden, commented “There are now over 1,500 communities in the UK with no bank branch, so by combining Starling’s cutting-edge digital banking technology with the unique reach of Post Office branches, we can bring simple and affordable banking back to these Bank Branch Deserts.

“I set up Starling Bank with the mission of improving financial health and making banking about the customer again. This is exactly the kind of development that will help us achieve this, returning banking services to often forgotten communities.”

In the same month, digital bank Monzo announced they have partnered with PayPoint, allowing users to deposit cash into their Monzo accounts using PayPoint’s network of 28,000 corner shops. Monzo’s CEO Tom Blomfield said "Though we're heading towards a cashless society, many payments are still made using cash. By partnering with PayPoint, Monzo customers can deposit their money easily and conveniently whenever they need to." Though looking at customer feedback it seems they might not necessarily agree, with many reporting that some shops displaying the PayPoint logo did not know how to use the system and refused their transaction. Hardly Monzo’s fault but when technology becomes a white elephant because staff don’t feel comfortable using it, it’s not an experience that reflects well on the brand.

But technical glitches aside, seeing the new players move into real spaces should galvanise the traditional banks into re-looking at their strategies for physical branches. The death of the high street, paradoxically, means there’s a lot of empty retail spaces out there, with one in ten shops vacant according to the British Retail Consortium. Services seem to be doing generally well, perhaps because people today tend to put value on experiences. In an article for The Guardian about Market Rasen high street in Lincolnshire, the owners of a surviving hardware store who offer services including cutting keys and fitting blinds, observed that it was hairdressers and beauty salons that had been opening in the town. In fact, according to a May 19 study by the Local Data Company, all over the country there’s been a rise in barbers, beauty salons, vaping stores, cafes, restaurants and bars, even as the banks, pubs, estate agents and fashion shops close.

As empty retail spaces build up, enterprising businesses from gyms to crazy golf experiences, find ways to fill them. There’s also a move towards sharing physical space. Next's revamped store in Manchester's Arndale Centre includes a prosecco bar, a barber, a children's activity centre, a Ford showroom and a bridalwear shop, with a spokesperson commenting “Lots of things under one roof is far more appealing to a shopper." Sainsbury’s meanwhile has given space to fashion retailer Oasis, as well as Habitat, Clarks shoes and Argos. Waitrose provides in-store medical services through Bupa. Perhaps this is the way banks need to go, taking on new spaces through partnerships with supermarkets or other large retailers.

The new bank branches should be smarter and work harder
But if banks can be persuaded to re-invigorate their branch strategy and halt or reverse bank closures – or take space within other retailers – what might these new, transformed spaces look like? Nottingham Building society suggest small, stripped-down automated branches with coffee shops but self-serve machines instead of traditional counters. Software innovation house Auriga builds on this idea, saying UK banks need to look to Europe for answers. Some European banks offer free wi-fi, laptop and phone charging and community spaces. They’ve become a place for people to access local organisations or even find jobs. They can also feature educational zones where staff can help get people into online banking or help them learn about saving and budgeting. But in terms of banking, what might draw customers in? European banks have reinvigorated footfall by creating digital experience zones where customers can self-serve, as well as having staff on hand.

So, banks who want to truly serve their customers and bring them back into physical spaces should offer best-in-class in-branch digital experience. The new smart banks will look physically different, with much larger areas for self-service and staff – human or AI– to greet customers, guide them towards technology and assist them if they need it. Staff should be at hand and informed by smart technology, alerted to who customers are and what they might be interested in, anticipating needs and being able to recommend products without being too intrusive.

These self-service areas could be open 24 hours a day, like the ATM lobbies common in Europe. There is likely to be far less emphasis on having bank clerks sat at desks and separated by glass, instead staff will be mobile, using tablets, often standing and moving from one area to another. Businesses and customers with complex requirements would be taken into lounge areas, more suited to spending a longer period of time.

The new self-serve machines could become high-tech ITMs (interactive teller machines) with an increased range of services – some already allow you to pay bills and deposit cash, the latter being particularly valuable for small businesses in rural areas. New services provided by them could include cashing checks, getting bank statements and applying for products like credit cards and loans, all offered 24 hours a day. Live video links could provide access to remote advisors, extending the hours they might be available. In terms of security, this could be supplied by passport readers, fingerprint scanners, mobile authentication, digital signatures or facial recognition. All innovations of course need to be carefully piloted to ensure they provide real value to customers before roll-out.

And there are already moves in these directions. Lloyds’ Manchester city centre branch has ‘breakout pods’, biometric technology to access safety deposit boxes and a coffee shop – and it’s open until 7pm. Not to be outdone, Nationwide’s new Manchester flagship is centred around ‘convenience, conversation, consultation and community’ according to designers Dalziel & Pow, with lots of natural wood and brick, house-shaped pods, iPads and opportunities for live video chat with mortgage, banking and financial consultants. NatWest have opened a Liverpool branch focussed around online banking, with free wi-fi, iPads at hand and staff to help set up customers. They are also piloting Cora at their Liverpool and Newcastle branches, an AI-powered ‘digital human’ that can answer basic queries and learns from interactions.

Branches should be crucial to any bank’s digital transformation strategy
To sum up some of the crucial facts and figures: customers are more strongly influenced by branch visits than online or mobile channels. 90% of customers believe there is a role for reinvented bank branches. The government is concerned about people being excluded from banking, and digital banks are making moves into physical spaces. This should be all the evidence traditional banks need to breathe new life into branches and look at ways of making the numbers add up. Bank branches should empower customers to self-serve, giving them enough assistance to feel comfortable doing it, even finding it satisfying and reassuring in a way that the old methods weren’t. Smart use of data should in turn empower branch staff to give customers personalised experiences and recommendations. In towns where a standard branch is simply not viable, ITMs can give customers 24-hour access to many services, perhaps augmented with initial human assistance. But what banks should remember most of all is a simple thing: put your customers first – or don’t be surprised when new players come in to take the physical spaces – and the business – you left behind.

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