A new analysis from a consumer group called Which? revealed that banks in the UK are shutting their doors at a shocking rate of more than 60 branches in a month.
The startling report which analyzed banking trends within the past three years said that a total of 2868 banks have shut down their branches since the beginning of 2015; several other banks are set to follow suit and shut down in the coming months. But what’s the cause behind these massive closures?
Banks’ Alarming Closure Rate
Consumer Champion Which? has been tracking bank closure announcements since 2015 and just recently revealed that a total of 2,868 bank branches in the UK have either close over the past three years or ae scheduled to close within the next few months.
The trend, which has picked up pace since 2016, poses a major problem for communities that can no longer access ATMs and other banking services easily. This year alone, almost 700 bank branches has shut their doors and removed their ATMs from various locations around UK. The closure rate was the highest in 2017 at 879 bank branches per year.
Of all the regions in the country, Scotland has been hit the most so far, with 368 bank closures since 2015, according to the analysis by Which? Following closely is South East with 361 bank closures, North West with 353 and South West with 327.
This trend is particularly concerning since it violates 2015’s Access to Banking Standard law, according to which, banks are obligated to consult with the communities where they provide their financial services and meet their customers’ needs before removing closing their branches.
Problem with Alternate Banking Methods
Although customers have the option of going to Post Offices where banks are not available, these alternatives don’t nearly provide the range of services a real bank does. Similarly, banking trucks that occasionally visit small towns and villages, where no other financial services are available, are not as convenient or effective as dedication banks.
Although mobile banking apps and online financial services are rising in popularity due their convenience, there is still a large number of people that either does not know how to engage with technology or simply prefers the traditional banking method. Furthermore, online systems can be vulnerable to meltdowns as seen in recent examples with Visa and TSB.
Money Expert Gareth Shaw from Which? says that the alarming rate of bank closures comes at a time when ATMs could undergo some drastic changes due to the way their network is funded. The closure of these machines as well as bank branches could the convenience of financial transactions for almost 3 million people in UK.
Shaw says that although the need for physical banks and ATMs has gone down significantly with the increasing popularity of online banking and electronic payment systems at retail stores, banks still need to consult with their customers and determine their financial needs before quietly shutting their doors.
Some of the banks such as the Lloyds Group have responded to Which’s report by saying that they do not plan on shutting down any of their locations for commercial purposes despite the availability of online and Post Office banking methods. Banks are discouraged from making closure decisions without monitoring consumer behavior. Lloyd currently holds a 21% market share in the banking industry which it plans to maintain in the future.
Nationwide also disclosed its plans of opening new branches as well as refurbishing its existing ones instead of shutting them down. It invested almost £73 million on the expansion project last year and is planning on investing an additional £81 million in 2018.
The bank explains that most of its closures in the past three years have been a part of its remodeling strategy whereby two branches within a close proximity to one another have been merged into a one big premise or a branch has been moved to a different location as per the customers’ needs.
UK Finance, a trade association, says that the number of bank visitors has decreased by a quarter in the past six years due to new technological advances, but technology isn’t for everyone which is why day-to-day services at a physical bank are still in demand. Banks should only consider closing down a branch once all other downscaling options, such as shorter opening hours and lower number of staff, have been exhausted.