By Dr Emma Gardner and Dr Amir Qamar
Birmingham Business School, University of Birmingham
Given that the number of cash points has also decreased – resulting in just under 53,000 ATMs in the UK in 2021, over 12,000 of which charge for transactions – this has important implications for the viability of the cash system.
Banks have traditionally been a staple of British high streets, but on 15th March, HSBC announced the closure of 69 branches across the UK. In 1986, there were 21,643 bank and building society branches in the UK, but since then, outlets have steadily dwindled, reaching just 8,805 in 2021.
While all UK regions have been affected by closures, Northern Ireland has been least affected in more recent times, only experiencing a 3% reduction in branches since 2012, followed by the North East with a 29% reduction. All other UK regions have seen over a 30% decrease in branches in this time, with the most closures happening in the South West (40% decrease). The recent news from HSBC, in addition to Natwest and the Royal Bank of Scotland’s February announcement that they are closing 56 branches, signals a further decline in the availability of in-person, local banking services. In addition, many of the branches that remain have been transformed into self-service outlets or advisory hubs, where banks can focus on developing relationships with their customers and providing more complex financial products and services than day-to-day banking.
The closures of branches has been attributed to a number of factors. Firstly, there is a reduction in the use of cash. For context, in 1986 a quarter of the population were paid in cash, and although cash is also a common payment method, it was used for only 6,075 million payments in 2020 compared to over 20,000 million in 2010.
Secondly, technological capabilities are resulting in the adoption of online and mobile banking, resulting in a reduced need for banks to offer physical banking services in order to service the majority of their customers effectively. Thirdly, branches are a costly expensive for banks to maintain; without the need to lease premises, pay utilities and employee salaries, banks are able to make significant savings on their operating costs.
The UK government states that older people, as well as individuals living in rural areas (due to internet connectivity) are those most likely to use cash. The news of branches closing is therefore worrying, given that some of the most vulnerable members of society are reliant on physical banks for access to money. It is estimated that 10% of people now live over 10 miles from a branch of their bank and the Financial Conduct Authority asserts that bank access declined the most in more deprived areas. Given that the number of cash points has also decreased – resulting in just under 53,000 ATMs in the UK in 2021, over 12,000 of which charge for transactions – this has important implications for the viability of the cash system.
Therefore, while branch closures may make ‘financial sense’ it is important for banks to consider their impacts on local communities and individuals. Not only it is becoming increasingly difficult for people to access physical banking advice and cash, but branch closures have other important impacts on local economies, such as unemployment. This highlights the need for banks to be more responsible and to consider the ‘triple Ps’: people and planet, alongside profit, when strategizing.
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The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of the University of Birmingham.