Explore more insights

Beyond branches, into the future

As bank branches shut up shop, doors open up for the new era of banking. 

Adriana Amato Feb 17, 2020

Something curious has happened in the last five years to Britain’s banks: They’re literally disappearing from our high streets. Since 2015, banks and building societies closed (or scheduled the closure) of 3,509 branches since January 2015.

That’s a rate of around 55 each month. NatWest alone shuttered 638 branches, by far the most branches overall. These represented almost half of NatWest’s branch network. Instinctively, it’s easy to view these closures negatively.

Branches are closing – but here’s the thing: that’s okay. If these branches were simply not being replaced by another infrastructure, then yes, we’d be fit to panic. The reality is, however, the closures herald a new era in how financial service providers and their customers interact.

 

How I learned to stop worrying and love digital
 

Speaking to The Guardian about the trend in branch closures, Which?’s money editor Jenny Ross noted that, “Bank branches play a crucial role within communities, serving consumers and businesses alike”.

But this statement perhaps misses the wood for the trees. She’s at least partly correct: Banks do indeed play a crucial role in communities, but banks aren’t the same thing as the brick and mortar buildings that contain them. The important bit is the services they render.

In Ross’s defence, she did absolutely hit the nail on the head later on in the article, noting that, “the [financial services] industry must ensure no one is left behind by the digital transition and that when banks shut their doors, they don’t shut their customers out of important banking services.”

That’s the critical point here, forget about branches and brick-and-mortar. There’s a whole new finance and banking infrastructure blossoming in the void left by branch closures. But – and this is a big but – this trend has to be inclusive. Instead of worrying about branch closures, we have to ensure people can access what comes next. That means reliable internet in every corner of this nation.

Truth is, for banking to develop and improve branches need to fall to the wayside. Although it might not always seem obvious, their disappearance is actually good news. It’s perhaps painful in the short term but it’s important to not lose perspective

Beyond branches

 

Outside of brick-and-mortar, an exciting realm of digital financial services has developed. Indeed, there is a growing list of digital-only banks which are entirely independent of location, requiring just an internet connection.

Consumers have changed, too – becoming more location agnostic when it comes to their commercial choices. That’s not only banking, but that’s also everything. The decline of the UK’s brick-and-mortar shops is well documented. A record number of shops disappeared in 2018 and about 16 stores closed their doors every day in the first half of 2019.

Instead of being a sign of the economic apocalypse, it’s simply a sign of changing mores. The lower footfall on the UK’s high streets is directly correlated with a shift to online shopping in recent years.

Location matters less to people now. What’s more important is cost and banking is not immune to this. As an interesting US study from Cornerstone Advisors found, there is “no statistically significant difference in the percentage of consumers by income level citing ‘convenient branch locations’ as a factor for choosing a bank”.

At all income levels, it was the lowest monthly fees that were the deciding factor. With loans and other financial products, the trend is similar. It’s no longer necessary to settle for whatever loan the local bank is offering. Instead, there is a vast array of financial products, from broad to niche, available at the tap of a button.

Absolutely, let’s talk about digital exclusion and make sure our rural communities and those from lower-income brackets can access online banking and lending. But also, let’s not slip into a rose-tinted nostalgia for bank branches. Consumers have by-and-large made their choice: the future is digital. 

 

Join the digital world of lending, book a consultation to learn more about how we're helping shape the new era of digital banking. 

finance
profitability
help
alternative finance
invoice finance
fintech
news
accountant
case study
trade finance
contract finance
working capital
startup loans
refinancing
fashion finance
merchant cash advance
future accountant
product of the month
women in funding
partner of the month
business tips
accountants
accounting
product
forecasting
live session
accountex
2019
capitalise
funding
monitor
ai
international women's day
covid19 coronavirus
corporate finance
accounting firm
m&a
asset finance
hire purchase
Follow Us
Sign Up to Receive Updates

Signup to our newsletter

Have insights about the accounting community sent straight to your inbox. Sign up to our newsletter.