What we lose when bank branches disappear

What a bank is for and who it serves has never been under greater scrutiny


The UK high street has come out of the coronavirus pandemic looking a little different. One of the starkest changes, typifying city-centre shopping in recent years, has been the disappearance of banks. Barely a week goes by without news of another casualty to closure and the abandonment of city centres due to COVID-19 has only exacerbated the trend.

Almost 4,200 bank branches have closed since 2015, according to consumer watchdog Which? That’s around 50 every month. Most recently, Santander announced 111 branch closures across the country by the end of August, which is one in five of its bank network. For the bank, like many, reality is biting.

“More and more people have gone digital and banks are running quite expensive physical bank infrastructure for a dwindling number of people,” says Natalie Ceeney, chair of Innovate Finance and head of the Access to Cash Review, which tracks how we use money and where we need support.

But, for the overwhelming majority of people, physical banks are still an important facilitator of access to cash. While the pandemic shifted our shopping habits so much that one in three pounds was spent online in 2020, according to the Office for National Statistics, that still means two in three were spent on high streets. 

“A lot of people who are most dependent on cash are the poorest, often the most rural, and they are more likely to have disabilities than people who are happy with digital,” says Ceeney.

Keeping equity for all in banking services

Joel Lewis, policy manager for consumer and financial services at Age UK, says: “Whether you’re working or getting a pension, not having access to a bank means you’re excluded from society. It means you can’t access your money, or make decisions about new or existing products or services.” 

For some, the physical bank branch is somewhere they go to conduct every single banking transaction. This could be because they don’t like the idea of technology, worry about cash being lost in the ether or can’t afford to bank through some ATMs. 

According to Ceeney, the average counter transaction has half the value of the average ATM one: some people can only afford to take out £10 from their account and some ATMs don’t offer anything less than a £20 note.

But for others, a physical branch and a human being on the other side of the counter offers an assurance for big life decisions. 

“There is a much broader church of people who at certain moments of truth – someone’s died, or getting a mortgage or fraud on your account – still want to see a human person,” says Kat Robinson, customer experience director at Metro Bank, which opens a handful of what they call “stores” every year. “We are human and there’s something about face-to-face human contact in terms of empathy and accountability,” she says.

Supporting the community and protecting against fraud

It’s for that reason that Metro Bank offers customers a cup of tea or coffee when they enter a store or branch. Banks offer lifelines, comfort and support to people who are often at their most vulnerable. And, after a year of turmoil, the bank’s role at the hub of a community is more important than ever. 

Bank staff are trained to spot signs of fraud, abuse and coercion, and to step in and gently support people they suspect are falling victim to a scam. 

“If you limit these face-to-face interactions with people, it limits the ability of trained staff to spot people being in the midst of scams or someone being vulnerable and doing with extra support,” says Lewis. “That’s tangible information you can’t pick up from an online banking transaction or potentially even from a customer who can use telephone banking support.”

It’s also important to maintain a physical presence to support representation for all a bank’s customers. “There are a wide variety of reasons people might want to go indoors and use a counter with a real human being,” says Ceeney, citing people with visual impairments who may not feel comfortable counting their cash out on the street after an ATM transaction.

Bolstering businesses in the local area

But banks don’t just support people, they also support businesses. Metro Bank looks at the number of small businesses in an area when deciding where to locate its stores. That’s because a bank does more than serve its retail customers. It also provides a place for businesses to store cash takings every night.

“If you think back a decade, retailers would take their cash at the end of the day, pop over to their bank branch and deposit it,” says Ceeney. If the bank branch doesn’t exist, they have a dilemma. 

“Do they leave money in the till overnight? That breaks their insurance rules,” she explains. “Do they drive somewhere to pay in the money? That loses them valuable time.” If businesses can’t bank, they can’t accept cash and if they can’t accept cash, they shut off access to a whole raft of customers.

It’s for such reasons that banks need to maintain access to physical branches, even as the financial incentives to do so disappear, because banks are more than a place where people keep money: they’re a community hub as vital as any charity. 

Accounting for a virtual CFO

Dr Martin Lukavec, senior lecturer in finance at the London School of Business and Finance, assesses the trend for using portfolio or virtual chief financial officers.

He says: “For a lot of small businesses, it is difficult to make financial decisions. This might be especially important to many businesses because CFOs are capable of identifying macroeconomic threats on the horizon, especially right now.

“Many business owners simply have no idea what their order books will look like in a few months, so this level of advice has become even more important in the turbulent times we are living through.

“There are some problems with the set-up, of course. A virtual CFO has incentives very different from a traditional CFO. Most importantly, their job is not connected with the fate of the company they are advising. 

“CEOs are often people whose main instinct is to push a deal through. In doing so, CEOs might, for example, not care so much about excessive leverage (too much debt) or to favour lower interest rates at shorter repayment schedules. And for any CFO, what is too much risk and what isn’t is always a thin, arbitrarily chosen line.

“A good CFO can foresee these trends, a skill that is invaluable to big enterprises as well as small ones.”