Tuesday, April 23, 2024
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Don’t bank on it

As life has moved inexorably towards online, so banks have been forced to re-evaluate their commercial operations. The result is a not just a raft or a spate of bank branch closures, but a decimation to the point that some towns have no branch at all with customers forced to drive for miles to find an open counter.

Most recently, NatWest announced in mid-October another 43 branch closures that will complete by March 2023.

According to the Consumer’s Association publication, Which?, in a report updated in October 2022, Bank branch closures: is your local bank closing?, since 2015 banks and building societies have closed some 5233 branches – an average rate of 54 a month. Worst affected are those under the NatWest banner – NatWest, RBS, and Ulster Bank – which will have lost 1234 branches by the end of 2023.

Lloyds Banking Group – Lloyds, Halifax, and Bank of Scotland – will have shut 924 by the end of 2023. Barclays will have closed (or scheduled to be closed) 962 branches by the end of 2022.

Of course, spending is very much digital now, whether via online purchases, smartphone/smartwatch or by card.

But that doesn’t mean that cash is dead.

An August 2022 House of Commons research briefing, The future of local banking services and access to cash, noted that cash accounted for 45% of all payments in 2015. But five years later it is used in only 17% of transactions in the UK. The pandemic reinforced this transition.

However, the report found that cash still has a role to play in society. Specifically, it noted that “older people, those on a lower income, and people with certain physical and mental health problems are particularly likely to be affected if society went cashless.”

And while many firms are now cashless, a good number still accept it. This leaves those on cash only diets frequenting those firms that take cash.

Interestingly, the Bank of England’s third-quarter bulletin, Knocked down during lockdown: the return of cash, reported in mid-October that since coming out of lockdown, “there has been a sustained, if partial, recovery in cash use … this reflects people – up to 60% of the population – holding more cash as a store of value, which is a fundamental role of money.” And this will no doubt rise as the cost-of-living crisis grows as physical cash is easier to manage – a point noted in the Guardian, in an October story, ‘Cash use rises amid bank closures and cost of living crisis, says Post Office’.

So, where does that leave businesses needing to bank cash when nearby branches have closed?

If banking involves minimal cash, then it’s perfectly possible to move from one of the big four high street (!) brands to one of the challenger banks. Starling is a good example, but there are others.

Although cheques are dying out, it is possible to bank them to a certain value electronically by submitting an image of the front and rear – but only if the bank supports this. Again, the challenger banks excel here.

Another option is to see if the bank is moving to a hub-type model where a single location shares banking services with staff from each bank working different days on rotation. According to the Evening Standard in September 2022, an additional 13 hubs are being planned to bring the current number up to 25. More are planned.

Alternatively, it is possible to use the Post Office network to undertake basic banking services – the deposit of cash and cheques. Anything else will necessitate a visit to the nearest physical branch.

Ultimately, over the long-term cash usage is expected to become increasingly rare. UK Finance, which represents the banking industry, thinks that by 2031 cash will account for only 6% of all payments. Regardless, a combination of decline in branch networks and long-term fall in cash usage means that banking is going to become more remote.

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