Beyond Branches – The End of the Brick & Mortar Bank?

News emerged last week of Santander planning to close 111 branches across the UK this year. In recent months M&S Bank announced the closure of all of their physical locations, the Bank of Ireland announced closure of over half of its Northern Ireland branches and HSBC announced that 82 of its branches are to close before September. TSB closed 91 branches last year with another 164 to go in 2021, and Barclays have closed 105 in the last twelve months. Research released by PWC in October showed that in the last five years 1,400 bank and building society branches had permanently closed, with 235 being shuttered in the first six months of 2020 alone. Across the Atlantic, analysis by Self Financial predicts that by 2034 there will be no physical bank branches open and operational.

Clearly the global Covid-19 pandemic has accelerated a direction the industry has been moving in since the 90s. The last year has made it hard for banks to have branch stuff on site, it has made it hard for customers to get to physical locations, and between those two it’s become difficult to justify keeping many branches open. The big consumer trend driving this, before and during Coronavirus, is the shift to customers engaging with banks digitally. First, we had phone banking, then internet banking and now app banking – it’s entirely possible that young consumers in 2021 will have a bank account but have never set foot in a bank. The last five years has seen an explosion in the digital-only banking space, with fintech start-ups like Monzo and Starling proving hugely popular with younger, tech savvy customers.

Of course, that is just one set of customers. The most recent ONS data shows that 96% of UK households have an internet connection, but that number falls to 80% when you look at households where one member of the family is 65 or over. Similarly, people over the age of 50 are significantly less likely to own smart phones. Right now, there’s a concentrated regulatory focus on the Financial Service sector working for and protecting vulnerable customers, and one of the categories of vulnerability set out by the FCA is “low capability”, such as those with limited IT-literacy. This may be a relatively small number of customers but it’s vital that we don’t leave them behind in the move to a digital-first future.

Cleary, we will see more and more brick-and-mortar banks phased out over the coming decades, but I hope that banks will strive to help older customers access their services in ways that work for them, and I’m sure the coming years will see innovative new approaches to helping these customers from across the Banking and Financial Services sector.

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