Banks shrug off branch closures amid shift to digital

Banks shrug off branch closures amid shift to digital
Chris Ratcliffe/Bloomberg

High street banks have highlighted the shift to digital banking as they explained their closures of branches to MPs.

Over the past year, many banks have announced they will be closing branches on the high street, so much so that there are now more than 200 ‘last in town’ bank branches across the country.

Last month (July 15), Treasury committee chairman Mel Stride wrote to Lloyds Banking Group, TSB, Barclays, Natwest, Santander, HSBC and Nationwide asking them to outline their current number of branches, the number of ‘last in town’ branches and their plans to maintain branches.

He also asked the banks about the factors considered when closing a branch and details of the support provided to customers when a branch is closed.

The banks consistently highlighted the shift away from face-to-face banking as a factor in the closure of their branches.

In a letter to Stride Natwest chief executive officer of retail banking, David Lindberg, said: “We have seen the pandemic accelerate trends that were already there. Three years ago, we didn’t have video banking, but ...we’re now conducting over 10,000 video appointments each week, compared to 100 a week in January 2020.”

Likewise,  Barclays UK CEO Matt Hammerstein said: “Fifty years ago, almost 90 per cent of all transactions took place inside a branch, but today that number is less than 10 per cent. 

“Profound technological changes, and the ease with which customers can access their accounts digitally means that our physical branch network is experiencing a sustained fall in demand. In fact, the majority of our customers (74 per cent) now choose to interact with us via telephone, online, or mobile banking.”

TSB said over 90 per cent of its transactions were now being done digitally and 67 per cent of its customers were now using mobile, online or telephone banking.

TSB Bank CEO Debbie Crosbie said: “Our recent Money Confidence Barometer research found that 95 per cent of people who have used online banking more frequently during the pandemic expect to maintain the same level of usage when the pandemic ends.”

However, this isn’t just linked to the pandemic, according to some banks.

Santander said in March it had seen a 33 per cent reduction in counter transactions across its network between 2017 and 2019. The bank plans to close 111 branches in 2021.

HSBC also said that customers' habits towards branches have been changing for many years, albeit Covid 19 has accelerated many of these trends. 

In his response to the chairman, HSBC CEO Ian Stuart said: “Over the past five years, the number of customers using our branches has fallen by almost 40 per cent. In nine in ten cases, customer interaction with the bank is now completed via the telephone, internet or smartphone and 99 per cent of cash withdrawals are made at an ATM.”

Responding to the letters from the high street banks, Stride said: “For many, particularly small businesses, the elderly and vulnerable, access to a bank branch is vital to accessing cash. While it is encouraging that the high street banks have engaged so positively with the committee, we note that there are over 200 ‘last in town’ bank branches across the country.