Why are banks and building societies closing so many branches?

Is your bank now a trendy wine bar? Back in 2001, NatWest Bank ran a major advertising campaign about branch closures featuring an older lady bemoaning the fact that her former branch was now, indeed, a trendy wine bar. NatWest promised to not close any more branches. That didn’t last. In fact you’re more likely to get an overpriced cocktail in a branch than basic banking services.

To my immense dissatisfaction, the pace of branch closures is increasing as banks become emboldened by the concept of online banking and AI. Virgin Money has just announced it is cutting 39 of its high street branches around the UK. According to LINK – who run the UK’s cash machine network – 242 bank branches are due to close in 2023… so far. Only Nationwide is not closing any branches (this year)

Which? – the consumer association – has been keeping its beady eye on bank and building society branch closures and according to the latest tally, an extraordinary – and horrifying – 5,838 branches have closed or are due to close since January 2015, that’s 54 every month. Which? has a postcode search tool so you can find out what branches are scheduled to shut in your area here. Frankly, I’m outraged after running a few searches. In my home town of Manchester, a ludicrously high number of branches bit the dust in the very centre of the city, where long queues for counter services were pretty much constant.

Even the financial services regulator, the FCA, has started to clamp down on the banks, making them consult on reducing hours, potentially put some closures on hold and have even stated explicitly that branches should not be closed unless there is a ‘fit for purpose’ alternative available.

Yet despite questions in Parliament, protests from every major consumer group, concerted campaigns and direct appeals to the banks, the closures keep coming. Which begs the question: is this the death of the bank branch in the UK?

What do we need bank branches for?

Whenever the subject of branch closures crops up, I get the same response from the industry – and lots of readers too. “No-one uses branches anymore, people do their banking online”

So am I being hopelessly sentimental about a costly and inefficient service that no-one uses? After all, banks and building societies are commercial entities not charities. Do we all just need to go with the times and move on?

It’s true that most banking services can be found online, but they key factor here is branches provide essential services you don’t get on the web or through a helpline. These services are numerous, but include: access to face-to-face guidence, financial advice, complaint handling, support for vulnerable people, access to cash services and protecting people from fraud.

I’ll give just a few of examples of why face-to-face banking services are both necessary and vital. According to the Office of the Public Guardian, there are currently 1.5 million active Power of Attorneys in operation in the UK. These essential legal instructions allow the holders to manage the finances for people who have lost the capacity to use them themselves. However, POAs are often badly logged on banking systems, meaning the holders need to speak to people who are either aware of their circumstances or are able to identify the POA on bank systems and provide the help they need.

For older or more vulnerable people, the expertise of counter staff can allow people to maintain their independence while navigating the complexities of our fast-moving society.  The same goes for people struggling to get by during the cost-of-living crisis who have reverted to cash to effectively budget.

Small businesses are also reliant of cash and counter services, particularly where debit or credit cards are not taken. There are countless market stall holders and small traders who need counter services to support them with their individual business needs.

But it’s fraud prevention that matters the most to me. Bank staff are trained to identify when their customers might have been tricked or misled in to transferring or withdrawing large amounts of money. They can register concerns if they feel a carer or friend or family member seems to be showing undue or inappropriate influence. They can freeze accounts where marital disputes become apparent and concerns are raised about one party ‘cleaning out’ joint accounts. When the branches close, this knowledge and the personal relationship staff have with their customers is over. Gone forever.

Can you use the Post Office for banking services?

Let’s take a look at the alternatives. The Post Office offers an invaluable range of banking services. With over 11,500 branches around the UK, most people will have a branch relatively close by.

The Post Office allows you to carry out most basic counter services like your bank – though only what your bank allows them to do, annoyingly. In the main, these include: cash deposit, cash withdrawal, balance checks and cheque deposit.

The Post Office also offers a range of other commercial activities, like savings, investments, loans, insurance, money transfer, foreign currency, mortgages and postal orders. Now these are either their own or branded products – this isn’t a comparison site. But that’s the same as a high street bank anyway.

Another essential yet relatively unknown service highlights what we stand to lose when branches close. The Post Office offers a document verification – vital when signing up for some financial products. Branches routinely verify documents by sight then physically authorise copies. This is only possible through the Post Office now – for a fee.

In the last year, there have been serious concerns raised about online-only financial services companies allowing people to scan documents to set up accounts and investments. These systems can be subject to fraud. After all, I could pinch your passport, or a photo of your passport, and have a crack at setting up an account in your name wherever businesses have lax security measures.

There’s also another problem here. The demands on Post Offices are extraordinary. The more services a business provides, the busier it is. It’s at least a 30-minute wait for the counter service at my local Post Office because so many people need to use the business. I think it’s deeply unfair to use the Post Office as a ‘one stop shop’ for all of the services multi-billion pound businesses like banks have cut to save themselves some cash.

What about Banking Hubs?

Just over two years ago the financial services industry realised that by collectively working together many (but not all) of the big banks and building societies could provide ‘collective’ banking services – Banking Hubs.

A Banking Hub works in a very similar way to a traditional bank. There’s cash access counter services like the Post Office (operated by Post Office employees). But what’s unique is Monday to Friday, there is a different representative (a ‘community banker’) from each bank or building society that used to operate in the local area, that you can speak to about more complicated banking issues. At present, the Banking Hubs aren’t offering sales of financial products, so you can enter a Hub without fear of being nagged to take out a loan or a premium account. But as the scheme develops, the teams in each Hub should be able to provide a wider range of services.

I’m a great fan of the Banking Hub project. In an ideal world it wouldn’t have to exist, but this is the best and only effective solution I can see for the desperate lack of high street branches, short of forcing banks and building societies to reopen branches. Of course, the cynic in me was naturally concerned about a largely industry-run program. After all, what’s to stop the banks losing interest when all the standard branches are closed? Good news on that front. The Financial Services and Markets Bill finally got Royal Assent at the end of last month. The bill guarantees access to cash for us all – and should compel businesses to be part of the Banking Hub project as a result.

There are now seven Banking Hubs open and 69 are due to open or in development. But for obvious reasons, it takes a while to source an appropriate venue, negotiate a lease, kit out the Hubs and train the employees. So why can’t they just use the old bank buildings? I asked Gareth Oakley of Cash Access UK, the organisation in charge of setting up the Banking Hubs, about this. Gareth explained that many banks and building societies didn’t actually own their branches, or many of them are not available or suitable, which means the team have to go back to square one. But where the Hubs have opened, they have proved (unsurprisingly) to be very busy and popular in the community.

Gareth added “Banking Hubs are already making a significant difference for residents and local businesses. They’re crucial in providing important cash services to that community and our data shows they’re getting busier all the time and local communities are reporting that they’re bringing life back to the high street.”

Banks are supposed to be consulting with the local community before removing the last branch service in towns, but the current rate of closures is really concerning me. I’d like to see all future closures stopped until a new Hub has been developed and is in operation. Why not mention this to your MP?!

You don’t have to suffer in silence though.  You can request a Banking Hub for your community through LINK here.

Adrian Roberts from LINK told me: “We recognise how important access to cash and face-to-face banking services are for consumers and communities. That’s why LINK automatically assesses any community where the last branch closes to see if new services are needed.  Communities that have already lost their last branch can also ask LINK to assess them. To date, 21 of the new Hubs were agreed as a result of community requests. Alongside, this we’ve supported more than 130 communities with new free to use ATMs too”.

LINK also have a great service where you can find the best fee-free ways to get your hands on some cash here.

A final rant

The decimation of the high-street banking branch network is the perfect example of why an industry can’t be allowed to police itself. Despite endless warnings and dire threats at the highest level of Government and regulation, the financial services industry has ruthlessly gutted the branch network and isn’t doing nearly enough to ensure that suitable replacements are in place in time.

It’s high time every bank and building society publicly committed to freezing the closure of all remaining branches until enough Hubs and free cash services are available to every community that needs them.

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