When the Royal Bank of Scotland announced in 2016 that it would be closing its branch in Cambuslang, Lanarkshire, it started a chain reaction. Within 18 months, the small town’s two remaining bank branches – run by TSB and Clydesdale – also shut their doors. The growing popularity of digital banking was widely blamed for the decline in footfall that had made these sites unviable. Cambuslang joined the hundreds of communities across the UK that had become unbanked over the preceding decade.
For Cambuslang Community Council, a formally constituted group of residents who’d been working to regenerate the area, it was a huge blow. Local people who’d depended on cash, many of whom were elderly and disabled, were “left stranded”, recalls the group’s chairman, John Bachtler, professor of European policy studies at the University of Strathclyde. Many of them were no longer able to manage their money unaided, which meant that they became “dependent on carers or family members” or even ran up problem debts.
It was also bad for the whole high street, as many small shops suffered a serious decline in business. After the closures, there were two cash dispensers left in Cambuslang, one of which was regularly out of service. That not only made it harder for consumers to access and spend money in town. Traders also had nowhere to deposit their takings other than a post office counter inside a convenience store in a less-than-convenient location for many of them.
The story would have ended there but for Cambuslang Community Council’s determination to tackle the problem. After writing to the banks’ CEOs with little success, it learnt of a scheme called Community Access to Cash Pilots (CACP). This was an independent initiative backed by a range of parties, including several banks, the Federation of Small Businesses and a consumer rights group called Fairer Finance.
The council applied to CACP and in 2019 received a grant to come up with a workable solution: a shared bank hub. This facility, located in an old butcher’s shop in the centre of town, is run by the Post Office in partnership with Bank of Scotland, the Royal Bank of Scotland, Santander, TSB and Virgin Money.
From Monday to Friday, customers of any of these five banks can use the hub for basic transactions such as depositing cash and cheques, withdrawing money and paying bills. To deal with more complex matters such as loan applications, advisers from each bank come in once a week to meet customers in a private room.
The impact has been “phenomenal”, according to Bachtler, who reports that the customer satisfaction ratings of the 500 or so people who use the facility each week range between 95% and 99%. He also believes that its creation has led to an increase in footfall in the town centre, encouraging new shops to open.
The biggest reason why people rely on cash is that they’re on low incomes. Dealing in cash is still the most effective budgeting method
Is it a solution that can last? Bachtler accepts that the UK is moving towards a cashless society in which bank branches will have even less of a role, but he adds that this will take at least 20 years.
“The idea that we don’t need branches in the meantime is completely flawed,” he argues.
According to research published in April by Which?, the magazine of the Consumers’ Association, just under 4,700 of the UK’s bank branches have shut their doors since 2015 – a decline of nearly 50%. It also identified 17 parliamentary constituencies where access to cash is “particularly poor”, offering three or fewer branches and 30 or fewer ATMs that don’t charge for withdrawals.
Despite this, Which? estimates that 5 million people in this country still rely on cash. At the rate that bank branches are declining, those who depend on notes and coins risk being “cut adrift”, it warns.
Shared hubs are only one way to tackle this problem. Startups, lenders, trade groups and charities are all working on concepts to try to keep in-person banking services alive. Yet they face a harsh reality, given that a further 226 branch closures are known to be scheduled for this year alone.
“We have 18.6 million regular online banking customers and more than 15 million mobile app users. Fewer customers are choosing to visit our branches. We’re like many other high-street businesses in that respect,” reports a spokeswoman for Lloyds Banking Group, which has closed scores of branches over the past five years. “We have to respond to this changing behaviour.”
Cat Farrow is lead coordinator of the Access to Cash Action Group at banking trade body UK Finance, which supported the CACP initiative. She believes that “there will always be a place for cash”. For as long as digital banking “isn’t a realistic choice for everyone, we’re committed to maintaining access to it”.
Farrow adds: “The biggest reason why people rely on cash is that they’re on low incomes. Dealing in cash is still the most effective budgeting method for them. If someone has £6.30 to last them a few days, they may find it easier if that’s in cash. It can also be important in remote areas where the lack of a good phone signal can make it impossible to make digital payments.”
The CACP scheme, which ended as planned in October 2021, trialled a range of solutions in eight underbanked communities around the UK. The shared hubs – which were piloted in Cambuslang and Rochford, Essex – attracted the most attention, with these two becoming permanent fixtures and five more set to open this year in towns ranging from Knaresborough in North Yorkshire to Brixham in Devon.
“It’s hardly a revolutionary concept, but the combination of having cash services at a counter and the ability to speak to someone from your own bank, all in a key high-street location, has proved incredibly popular,” Farrow says. “More than £11.6m-worth of cash withdrawals and deposits took place in Rochford and Cambuslang during the hubs’ first year of operation.”
But the hubs do have their limitations. Some small businesses feel uneasy about depositing large sums of cash with them, for instance, and they are unlikely to be set up in small and/or remote communities. As such, they are seen as only one piece of the puzzle.
Other concepts that have been tested include a ‘cashback without purchase’ service run by bill payment network PayPoint in small shops, which has enabled people to check their account balances and/or withdraw cash without having to pay a fee or buy something. In light of a recent legislative change, 2,000-plus stores nationwide have made the service available and more are expected to follow.
A ‘click-and-collect cashback’ service has also been trialled in Burslem, Staffordshire, while dedicated banking areas were set up in Co-op supermarkets where consumers and businesses could access their accounts with the help of trained staff. In addition, post offices that already offered banking services were refurbished to make them more suitable for larger cash transactions. Automated deposit machines were installed at some of these so that local businesses could bank their takings without having to queue.
It remains to be seen how many of these innovations catch on more widely, but they do indicate a willingness in the industry to reimagine bank branches by consolidation or outsourcing their services.
One of the prime movers in this respect has been the Post Office, which has been filling much of the void on the high street left by the banks’ exodus. Since 2017, it has been handling basic deposits, withdrawals and balance enquiries for customers of 30 banks and building societies via its banking framework agreement, which has just been renewed until 2025. The company’s 11,500 branches nationwide are handling more than £3bn a month in cash transactions.
A Post Office spokesman says that it provides the only existing cash network in the country with “the scale of infrastructure, robust scalability and security” in place to manage this role in the cash market.
He adds: “In many places across the UK, the Post Office is providing the last counter in town where people can access cash.”
Does all this mean the end of the traditional bank branch as we know it? Not quite. Metro Bank has put branches at the heart of its bricks-and-clicks strategy and, despite some setbacks, the plan seems to be working. Launched in 2010 after the global financial crisis, it was the first new high-street bank to open in the UK in more than a century. Its core aim was to provide excellent service at a time when public trust in the sector was at a low ebb.
As rivals shut their branches, Metro Bank opened them, seeing them as key to its “culture and brand”. Today, it has 79 branches, although it’s planning to close three this year.
“Many customers value face-to-face interactions for key moments, such as taking out a loan,” says a spokeswoman for the bank, pointing out that branches are about more than merely protecting access to cash. “Our small business customers also benefit from a named local business manager who can help them in all sorts of ways.”
In many places across the UK, the Post Office is providing the last counter in town where people can access cash
That said, Metro Bank’s sites are quite different from those of traditional branches, opening from early in the morning until later in the evenings and on weekends – times that are convenient to its predominantly younger clientele. Metro Bank branches, which it calls “stores”, also offer features such as safety deposit boxes alongside more traditional counter services.
The bank says that there is a slight bias among older customers towards using its branches but adds that more than 60% of its current accounts are opened on site. “Customers can walk in without an appointment, open an account on the spot and leave with a debit card,” the spokeswoman says.
The bank’s expansion plans have been hit hard by the Covid crisis and its shares have not recovered since an accounting scandal in 2019, in which it erroneously classified a portfolio of commercial loans for capital purposes, thereby failing to hold enough capital to ensure regulatory compliance.
That said, the business is still growing. It serves 2.5 million customers, up from 200,000 in 2013. In February, it opened its latest branch in Leicester, although it admits that it has no immediate plans for further openings.
The incumbents that Metro Bank is challenging have changed the branches they have retained, cutting staff numbers and using more automation. So says Tony Farnfield, a partner at BearingPoint, a tech consultancy that has helped Barclays to modernise its branch estate. He thinks there is clear scope for banks to go further, although in an increasingly cashless future the main role of branches is likely to be advisory.
“It will be about helping people with complex borrowing decisions, where you want to see customers face to face,” Farnfield predicts.
Nonetheless, he agrees that branches can be key to a bank’s brand and says that lenders are sometimes wrong to close certain sites. He cites work that BearingPoint did with telcos that found that even an unprofitable mobile phone shop could still be extremely good for “brand perception” if its footfall is high enough.
“We built an AI model that correlated sales and geolocational data. From it, we found that removing an unprofitable store would sometimes make no difference to the bottom line,” Farnfield says. “So I think banks really have to be careful.”
Back in Cambuslang, Bachtler says that he’s been heartened by the success of the CACP experiment. But he fears that the situation nationwide is unlikely to improve unless Westminster really gets behind initiatives such as shared bank hubs.
In May, the government finally answered long-term calls for it to protect the cash economy by law. In the Queen’s Speech, it said that it would be legislating to ensure “continued access to withdrawal and deposit facilities across the UK” but gave no further details. It remains to be seen whether regulators will be awarded powers to prevent banks from closing more branches. Currently, all they can do is issue guidance and share examples of good practice to dissuade them.
Another positive development is that big banks have signed a new voluntary agreement which means that an independent assessment of local needs will be conducted each time a branch is shut. Such a review could recommend that a shared branch is opened, an ATM installed or a post office upgraded. The signatories say that they will commit to delivering whatever is recommended to ensure that vulnerable customers and cash-dependent businesses continue to have access to the services they need.
Farrow says that more pilots are on the cards. When it comes to the new legislation, she is keeping her fingers crossed.
“Although I don’t know what the new legislation is likely to stipulate,” she says, “we’re hopeful that it will enable us to continue with the progress we’ve made so far in protecting access to cash in communities across the UK.”
