With the ongoing theme of branches across the UK closing down for good, banks need a new way of providing an in-person offering to individuals who still value the service. Banking hubs are small outlets that offer everyday banking facilities, such as the one recently opened in Derbyshire. This could be the answer to the future of branch banking in small towns and villages that have had their access to branches reduce by the trend of closures.
GlobalData’s 2023 Financial Services Consumer Survey highlights the value that branches have to UK customers when conducting their financial activities. 29% of UK customers use a branch at least once a month in order to conduct a financial activity. When asked about their preferred channel to conduct specific banking activities, the top response for both applying for a mortgage and opening a new account was in-branch, as cited by 46% and 33% of respondents.
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Applying for a mortgage is one of the biggest financial decisions customers are likely to make, and UK consumers prefer to conduct this in-branch. As such high-value products, this data highlights the value of having a branch-style service to offer to customers. A physical presence also creates improved cross-selling opportunities for banks with customers opening accounts, as employees can promote their bank’s premium account or credit card.
5,050 UK branch closures in the past decade
Over the last decade, the UK has seen the closure of 5,050 branches, which equates to around 54 closures per month since 2012. This trend is set to continue, with a further 249 closures so far announced for 2024. The majority are accounted for by Barclays, Lloyds, and Halifax, which are shuttering 197 between them. In contrast, Nationwide has made a ‘Branch Promise’ to its customers, which states that in every location in which the building society currently has a branch, it will maintain a physical presence until at least 2026. However, outside of Nationwide, none of the big incumbent banks have announced a similar programme and are continuing the mass closure of their branches.
GlobalData 2023 Financial Services Consumer Survey
Further findings from GlobalData’s 2023 Financial Services Consumer Survey reinforce the importance of a bank presence for UK customers. Satisfaction metrics from UK customers show that on average ‘ease of access to a branch’ has the second lowest satisfaction of 21 bank attributes, with a net satisfaction of 70%, with the majority of other attributes scoring over 80%. Furthermore, when analysing which attributes have the largest effect on a bank’s Net Promoter Score, this same attribute ranks fourth out of 21 attributes.
New banking hubs would allow banks to make cost savings on staff and their footprint by continuing to close down their branches, while retaining a physical presence to offer branch services to communities. The newest example of this approach is in Derbyshire, where the Post Office has set up a banking hub. Five banks will be operating in this hub, with a different bank available for customers on each weekday: Barclays customers on Mondays, NatWest on Tuesdays, HSBC on Wednesdays, Lloyds Bank on Thursdays, and Santander on Fridays.
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By GlobalDataBanking hubs appear to be a good alternative to the traditional branches banks currently offer, particularly in underserved areas. Banks should look to use these hubs as an opportunity to maintain and grow their relationship with customers who prefer banking using physical outlets over digital touchpoints.
Harry Swain is an associate analyst, GlobalData
