Between January 2015 and June 2021, 4,299 branches in the UK were closed or scheduled for closure. At the time of writing, there are over 500 towns across the country with just one operational bank branch.
The continued closing of bank branches and ATMs across the UK is a cause for concern, especially in rural and poorer areas where access to cash is a vital part of local economic activity. As I outlined in a previous article, access to physical cash is important for the financially vulnerable – non-digitally savvy people, as well as those with a lower income or poor financial control.
As a result, regulators, UK banks and the Treasury have reacted with plans to improve access to banking services in local areas – and therefore improve people’s access to physical cash. However, these plans are struggling to get off the ground, with several sticking points halting progress.
Banks, regulators and government react
The acceleration of bank closures over the past few years has prompted the chief UK financial regulator to take steps to block banks from closing branches in order to “ensure consumers and businesses can still use cash.” Furthermore, these measures would include legislation proposed by the Treasury to give powers to the Financial Conduct Authority “to guarantee reasonable public access to cash facilities.”
In response, reports suggest that the large banks, including Lloyds, HSBC, Barclays, Santander and NatWest, are planning on setting up so-called community banking hubs to help avoid an access-to-cash crisis for millions of people across the country. Banks are set to agree a five-year deal to set up and share the cost of communal banking hubs where “customers of any large bank can pay in or withdraw cash and carry out transactions.”
What are community banking hubs?
Community banking hubs are essentially like traditional bank branches. Customers can access their accounts, deposit and withdraw physical cash, and arrange walk-in appointments to speak with an accounts manager. The major difference being that community banking hubs are shared between different banks, each of whom has a stake in the hub’s operations and provides their own employees to staff the hub and serve their own customers.
Trials of community banking hubs in areas where all banking branches have been shut down were spearheaded by the Post Office and the Access to Cash Action Group (CAG) last year in Rochford, Essex and Cambuslang, near Glasgow. Similar trials have taken place in New Zealand.
These trials were set to come to an end in October, but have now been extended to April 2023. It is estimated that around 12,000 people benefitted from these innovative banking hubs, which were hugely popular with local communities.
Natalie Ceeney, independent chair of CAG, said: “We can already see the positive role the Hubs are playing in revitalizing these local communities – providing essential banking services for individuals as well as a boost for local businesses. Extending the pilots gives us more opportunity to really understand what works for people, and what role services like these could play in the future. These are early steps, and over the coming months the Group will explore a wide range of options to protect access to cash.”
The hope is that these initiatives will encourage increased consumer footfall in areas that have suffered the most from the double-edged sword of increased financial digitization (the move away from traditional “cash-in-hand” banking methods) and repeated economic crises.
Furthermore, CAG also announced that it would be rolling out a far-reaching “cashback without purchase” scheme in smaller shops, allowing consumers to easily access cash in areas hardest hit by ATM closures, an initiative made possible by legislation passed back in April.
However, while this last measure from CAG will certainly improve access to cash, it doesn’t help with those wishing to deposit cash, and ultimately doesn’t solve the problem of sustainable cash circulation within communities – two issues that would be resolved by a successful rollout of community banking hubs.
Banks beating about the bush
Of course, banks will have their own vested interests in launching community banking hubs. Primarily, the shared branches will allow them to maintain a widespread physical presence throughout the UK, without having to bear the full brunt of the costs that come with such a reach.
However, costs and location seem to be two of the main sticking points when it comes to putting the plan into action. In September, banks were accused of “dragging their feet” over shared branches, while simultaneously “lobbying for a tax cut worth £1.5 billion.”
Indeed, one of the main challenges to the success of the bank hub initiative is the development of deeper relations between the competitive banks, both at the local and national level. In order to encourage an agreement, the UK’s Chancellor of the Exchequer, Rishi Sunak, could cut the eight percent surcharge the sector pays on top of the ordinary rate of corporation tax.
Taking the next step
Pressure is mounting on banks and government alike to find a solution, with the number of in-branch users expected to rise to 35.2 million between 2021 and 2025.
The signs are still encouraging though, with John Glen, Economic Secretary to the Treasury, stating that “the next step is to get this innovative new solution rolled out to shops in our local communities to protect access to cash for the millions of people who rely on it.”
As is often the case, banks will need to react in order to meet the ever-changing needs of their customers. In this instance, that will mean working closely with government, regulators and, most important of all, each other in order to find a solution.
Failure to do so would let down millions of people throughout the UK who depend on easy access to in-person financial services.
For UK banks to be reactive enough to meet the needs of their clients, and to be able to roll out innovative solutions and initiatives such as community banking hubs, it’s important that they have a strong, experienced partner in branch technology.
Sopra Banking Software’s solution for UK building societies provides our clients with the tools to provide cutting-edge digital experiences for their own customers. And our Deposits & Savings solution provides digital management tools that help to drive customer engagement.