What is the future of the bank branch?
It’s a question I’ve asked here before, and it always generates sackloads of letters and emails — especially from FT readers living in more rural areas where branch closures have a particularly devastating effect.
Bank branches are closing at the “alarming rate” of 60 per month in the UK, a trend that has accelerated since 2016, according to a Which? report this month. In the past three years, nearly 3,000 branches have been culled or earmarked for closure.
Banks justify the closures by pointing to the rising take-up of online and mobile banking services. However, this week’s “ Financial Lives” report from the Financial Conduct Authority raises some serious questions.
In rural areas, the FCA found that take-up of mobile banking services was just 23 per cent — nearly half the 45 per cent rate seen in urban areas. The same was true for online banking, at 54 per cent for rural areas against 72 per cent for urban ones.
Of UK adults who said they never used the internet, 70 per cent lived in rural areas. You could argue this is due to demographics — the FCA data show that rural populations have a higher proportion of retired people, with more than half saying they rely mainly on the state pension.
But as readers who live in the country are probably already yelping, there are also big problems with rural broadband connectivity. The FT reported last weekend that mobile phone masts could be attached to church steeples in a divine plan to boost connectivity from the Church of England and Goldman Sachs, the investment bank that once claimed to be “doing God’s work”.
In the meantime, is it any wonder that a much higher percentage of the rural population told the FCA they had difficulties getting to a bank?
Bank branches provide vital services to local people — not to mention local businesses and charities. Broadly speaking, poorer customers tend to be more cash dependent. Yet branches in more deprived areas are likely to be less profitable, and thus more at risk of closure.
According to the FCA, 17 per cent of adults in former industrial towns such as Redcar, Rotherham and Merthyr Tydfil reported it was “difficult” to get to a bank branch. Yet in wealthier university towns such as Canterbury, Lancaster and Aberystwyth, this figure dropped to just 4 per cent.
Could anything — other than regulation — reverse the rate of closures? A recent press release about a branch actually opening piqued my interest.
The three-storey flagship Halifax branch opposite Tottenham Court Road underground station in London is allegedly the UK’s biggest, and “a potential blueprint for the future of banking”.
Since 2011, parent company Lloyds Banking Group has cut around one-third of all branches. So this I had to see.
Inside, it looks nothing like a bank. Think of a cross between a crèche and a WeWork. Just like the shared workspace provider, the Halifax flagship is dotted with breakout areas and has a huge coffee shop on the top floor that sells Halifax-branded bags of sweets for £1. Once you’ve grabbed a hot drink, you can retreat to different “zones” for travel, children’s savings or the “home hub” to discuss a mortgage (one senses this is how the bank will make back the cost of the fit-out, which must have been enormous).
Wealthy customers will also be impressed by the array of biometric safe deposit boxes in the basement. They cost from £200 per year — providing you have an account or home loan with the Halifax — and can be accessed 7 days a week when the branch is open.
The branch is strewn with Scandinavian style furniture. Some pieces have been branded “please don’t climb on me” so you can tell them apart from the actual children’s play areas. These boast animated “piggy adventures”, including a savings bank being blasted into space (pigs might fly, indeed). One very good feature is the “feed the pig” coin-sorting machine, where children and adults with Halifax accounts can pay in large quantities of loose change.
With the children occupied, perhaps parents can discuss taking out a mortgage, loan or credit card?
On the day I visited, the staff easily outnumbered the customers. Yet they knew their stuff, and answered all of my questions — precisely the reason many of you tell me you prefer to visit a branch. However, I got the sense they are mostly there to sell the higher value products and services. A giant “DIY Banking” sign shows the emphasis is firmly on using machines to make deposits, withdrawals and pay bills, with some human support hovering in the background — just like supermarket self-checkout tills. Blue phone booths and wall-mounted tablets enable customers to contact phone and online banking for technical assistance.
As a way of attracting customers, there are free seminars in the café on subjects including how Help to Buy works. Obviously, Halifax has a vested interest as a mortgage provider — but this is a great idea. There are not enough opportunities for people to meet face to face with bank staff to ask questions about financial products and access further information.
Google and Microsoft are also involved, offering coding lessons for 8-13-year-old customers. Why stop there? I bet GCSE maths revision sessions or the opportunity to improve your numeracy skills would also be popular. A way for banks to connect with communities, and potentially get more customers too. Could this part of the “future blueprint” be taken back to reinvigorate existing branch networks? Or will it only work in the wealthiest urban areas?
One hundred years ago, this Halifax branch was the flagship store for Burton, the men’s outfitters. More recently, it had languished as a Dorothy Perkins. And, goodness knows, there’s enough space opening up on local high streets that would be a lot cheaper to rent than New Oxford Street. Halifax said there was “every chance” that events could be rolled out more widely in time to existing branches with enough space for this to work.
But I wouldn’t hold your breath. The FCA’s report has highlighted the problem, but stopped short of taking any action. Without parliamentary or regulatory intervention, I fear that further branch closures are the most likely outcome.
Date published: 19 June 2018
Word count: 1070
Claer Barrett is the editor of FT Money: firstname.lastname@example.org; Twitter: @Claerb
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