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Published 30 August 2023
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6 minutes

What is the Future of High Street Banking?

Banks are disappearing from the high street. But does that have to be the answer? We look at the present, and potential future, of high street banking in the UK.

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The UK high street is going through a rough patch. Not only is the cost of living crisis making it harder for businesses to operate, banks are continuing to beat a retreat away from their physical locations. 

July’s announcement by Virgin Money that it will shut 39 branches – a third of its banks – means there will be 621 bank branch closures by the end of 2023 alone, according to LINK, the UK’s cash machine network. And the impact of this goes beyond making it more difficult to access these local services.

“You remove certain core services from high streets and town centres,” explains Alex Schlagman, co-founder of Save The High Street, “and you reduce the number of reasons for people to come to that town centre, which affects the businesses around it.”

As businesses falter, local communities suffer from the loss of jobs and social spaces that give areas their distinct personality.

“We’re in the most transformational period in the history of high streets, and consumer need for high streets is evolving alongside that,” says Schlagman, who believes that banks need to think harder about how they fit into that environment. “Can [banks] create hubs for professional services to provide support to individuals and businesses in the local community using their space,” he asks. “Can they provide more value-added customer support?” 

He also suggests that high street banks could set aside times of the week when people would know that they can engage with a human being who can “add value over and above a few clicks on a website”.

Why are banks closing branches?

One of the biggest problems is that branches are competing with the banks we carry in our pockets. And the number of people using online and mobile banking is only going to increase as the years go by. It is projected that, by 2031, 93% of adults will use remote banking, according to the Payment Markets Summary 2022 published by banking trade association UK Finance.

The rise of remote banking has gone hand in hand with a decline in high street footfall, which is yet to fully recover from the effects of the pandemic. When HSBC announced last year its plans to close 114 UK branches in 2023, it argued that “footfall in many branches is at an all-time low, with no signs of returning”. 

How are local banking services being protected?

Not all banks are following the same path of closing high street branches. In June 2023, Nationwide Building Society renewed its ‘branch promise’, pledging to keep its existing branches open until at least 2026.

This suggests an awareness of the impact these closures – and the move towards a cashless society they help to create – can have on vulnerable customers. A study published by charity Age UK in May 2023, for example, revealed that four in 10 (39%) bank account holders aged over 65 do not manage their money online. 

But Nationwide Building Society is just one provider among many. Action from more banks is needed to protect physical access to these services for the communities who need them the most.

This is where banking hubs come in. Provided by not-for-profit organisation Cash Access UK and operated by the Post Office, these hubs are a joint venture by 10 major high street banks and building societies in the UK: Bank of Ireland UK, Barclays Bank, Danske Bank, HSBC UK, Lloyds Banking Group, Nationwide Building Society, NatWest Group, Santander, TSB, and Virgin Money. These providers collectively own and fund Cash Access UK and provide shared services to their customers.

As well as offering everyday banking, these hubs aim to fulfil the gap left behind by branch closures, allowing customers to talk to someone face to face about more complicated personal and business banking issues.

While banking hubs can provide invaluable services to local communities, they can’t currently keep up with the pace of the problem. At present, there are just seven banking hubs open for business in the UK – with none in Wales or Northern Ireland – and 69 at the planning or construction stage. That’s not only a fraction of the closures in 2023, but a drop in the ocean compared to the thousands of branches that have disappeared over the past decade.

“Older people are constantly telling us how left behind they feel, and how much harder life is when they are unable to access and use physical banking services,” says Caroline Abrahams, charity director of Age UK. “The new shared banking hubs are part of the solution; however, roll-out has been slow and all the while hundreds of thousands of people are left excluded when their local branch closes.”

What will high street banking look like in the future?

The government, at least, is aware of the issue. In its Cash Access Policy Statement on 18 August, the Treasury announced that people in predominantly urban areas should be able to access cash services, such as deposits and withdrawals, within one mile of where they live. People in predominantly rural areas, meanwhile, should be within three miles of these services. If access to these services were to change, a replacement service must be put in place before the change or closure takes place – a rule that may help speed up the implementation of banking hubs.

But what else can be done to ensure more than the bare minimum level of service is retained? The solution may lie in banks embracing their role in the local economy.

Speaking about what banks should be doing, rather than what they are doing, Schlagman says: “Everybody should be working together. Collaboration is key on high streets. And the banks need to play an active role in the formation of traders’ groups, business improvement districts and community groups – they need to be a key part of the community.”

As for what they can offer in a branch, thinking about how the online experience can interact with its physical counterpart may be more fruitful than pitting the two against each other.

“[People] want something that is joined up between their online and offline journey so that there is a synced-up version of the physical store that connects with the digital experience as well.” 

And it may only be a matter of time before someone – whether it’s one of the traditional banks, the online-only challenger banks or a new entry into the market – seizes that opportunity.

Image source: Getty Images

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