As personal and business banking customers across the UK adopt digital technology at an accelerated rate in their everyday lives, this raises the industry benchmark for smarter, sleeker, and more innovative banking solutions.
by Jon Munnery, Insolvency & Restructuring Expert, UK Liquidators
The coronavirus pandemic is a testament to business agility, as financial institutions swiftly transitioned to online operations under unprecedented economic conditions and overhauled communication infrastructures to maintain customer relationships virtually. The banking industry witnessed a watershed moment in consumer behaviour as the temporary closure of bank branches pushed those most resistant to change and opposed to embracing digital banking to test the waters.
Now that most Covid-19 restrictions have been lifted, how has this affected the footfall of bank branches?
Is it the end of an era for high street bank branches?
Taking it back to before the pandemic, customers moved to online banking in droves which saw footfall figures gradually dwindle, and further decline when the pandemic hit. This led to a record number of branch closures, with hundreds more set to close in 2022.
According to a House of Commons briefing paper, the number of bank branches in the UK roughly halved from 1986 to 2014. The decline in bank branches can be attributed to the following factors:
- Cost-cutting measures
- Mergers within the industry
- Competitive pressures from new entrants in the banking sector
- Increasing popularity of internet banking.
Which? have been actively tracking UK bank branch closures since 2015 and can confidently conclude that bank branches are closing at a rate of around 54 each month.
The NatWest Group, which comprises NatWest, Royal Bank of Scotland and Ulster Bank, will have closed 1,154 branches by the end of 2022 – the most of any banking group.
Lloyds Banking Group, made up of Lloyds Bank, Halifax and Bank of Scotland, has shut down 769 sites, rising to 830 in 2022.
Barclays is the individual bank that has reduced its network the most, with 841 branches having closed – or scheduled to – by the end of 2022.
The pandemic sped up the shift to online and mobile banking and provided banks with the optimum opportunity to showcase the potential of their digital services on offer. Data gathered by YouGov Custom reveals that over half (56%) of consumers say they will avoid bank branches in the future – thanks to coronavirus.
A new age of cutting-edge banking technology
While the hospitality industry speeds the way in innovative food delivery and the retail industry revolutionises in-store customer experiences – the banking industry is cementing its position as a trailblazer in fintech.
Here are some technological trends in the banking industry that are making bank branches redundant.
- Mobile banking – The continued rollout of mobile banking services has drawn fierce competition from challenger banks responsible for driving away customers from household high street banking giants. The UK is leading the challenger bank revolution as the likes of Monzo and Revolut are best known for dominating the UK market. Revolut recently became the UK’s biggest fintech firm as its valuation peaked at £24 billion.
According to the Which? consumer champion’s current account survey, challenger banks are outperforming traditional high street banks, with users ranking Starling Bank, Monzo, and Triodos highly for their customer service and mobile apps.
The survey also found many traditional high street banks languishing at the bottom of the customer satisfaction table, often ranking poorly for service in branches. This not only diverts customers online, but fuels the takeover of digital banks and therefore, the decline of bank branches.
- Chatbots – Digital humans or robo advisors powered by artificial intelligence are in use by many banking providers to streamline the customer service journey and generate an instant response to customer queries. It also cuts out any necessary time spent by human chat agents to answer non-complex queries, for which answers can be automatically populated from the website.
Artificial intelligence is also being used to improve the efficiency of back-end processes, such as data classification and risk analysis.
- Mobile branches – Although digital banking is accessible for the majority, not everyone can navigate online banking services with ease. The demand for in-person services remains, albeit small, which brings us to the introduction of mobile branches. NatWest and Lloyds provide access to mobile bank branches to allow individuals to carry out basic banking, such as deposits and withdrawals.
While customers no longer need to visit a physical branch due to the advanced functionality of online and mobile banking, the expectation for fast and immediate customer services remains as customer support transitions online. In a world where support can be accessed almost instantaneously through the click of a button, the stakes are high for digital banks, their reputation and customer loyalty.