The humble high street bank will soon be a thing of the past
This piece is from our special report on digital banking. Click here to read the first piece in the series, "a bank branch in your pocket."Click here to read the third piece in the series, "The digital race."
I went into an actual branch of Lloyds bank last week. It was the first time I had been into a bank branch in a good five years. It was huge, comfortable, welcoming and almost completely empty. This came as no particular surprise: I never go to the bank anymore. If anyone owes me money, be they friend or employer, I expect them to pay online directly into my bank account. Going to the bank with a cheque is so little a part of my routine that, the last time I had one, it took me so long to cash it they called to ask if I needed it reissuing.
And think about how often you pay for things in cash these days. Almost never. I use my card for everything, small payments included, and make transfers—to HMRC, to my sisters, to the builders—online. If I were a tiny bit younger I’d probably have downloaded a money transfer app by now and, if I were a Barclays customer, I’d sign up for one of their new bPay bands. You pop it on your wrist and then wave it at any one of 300,000 scanners across the UK to make your payments. Cash now accounts only for around half of all transactions in the UK—and that’s falling fast. We’ve passed the tipping point.
If you don’t pay for things in cash and you don’t get paid in cash or cheques, why would you need a bank branch? I spoke to a church warden recently who was worried about how he was going to deposit his congregations’ collection when the last branch in the area had gone. I told him not to worry: by the time the last branch has gone they’ll be simply be waving their phones at his collection plate on their way out. Job done.
There is a view that customers won’t allow this shift to happen; that we all need face-to-face contact when it comes to money. This is nonsense. One need only look at First Direct. It may be owned by HSBC, which allows you to drop off your cheques (should you have any) at their branches, but it is clearly an online-only bank and does a perfectly good job of selling a variety of products to happy customers with no personal contact required. It is regularly voted Britain’s favourite bank.
Then there is Hargreaves Lansdown, the online stockbroker and fund manager. It isn’t a bank, but it has been the supreme disrupter of the financial services market over the last 10 years. With £45bn of our money under its management, Hargreaves has proved definitively that, if the brand is really trusted, people don’t need human interaction to feel confident that their money is safe.
These newish entrants are set up to be online and telephone-only businesses. That means they have fantastic websites (fast, well designed, easy to use) and if you telephone them they have someone who knows what they are talking about answer the phone politely. Tesco Bank, which launched its first current account in June, has the same feel. You can deposit money at branches if you must but you can’t exactly stop into Tesco Metro to talk mortgages: this is an online and telephone bank, as its current account slogan (“click, tap, chat”) makes clear. That doesn’t seem to be deterring customers: it has seven million of them.
The number of physical bank branches has fallen by 40 per cent in 25 years, and it will keep falling. That doesn’t mean there will be no branches; you can expect the banks to have a flagship branch or two knocking around. They are good for branding; good for introducing new or complicated products; useful for keeping the technology refuseniks happy; and, for now at least, necessary to serve the needs of the decreasing number of businesses that still take a lot of cash.
You might also see a trend for the big retail banks warding off criticism by having mini-fleets of mobile banks making high profile trips to a few villages in Northumberland, or perhaps committing to keep a sparse network of branches in market towns. But don’t expect this kind of service ever again to be even vaguely comprehensive. Most people don’t want it to be—a recent survey showed that only one in eight of those surveyed would want the nation’s challenger banks opening branches. And technology means they just don’t need to.
