Bank branch closures are back on the agenda in the UK, and they seem to be happening faster than ever. Just recently, Santander announced the closure of 95 of its branches (BBC News), which is a quarter of its entire UK branch estate. This follows the news that Lloyds is shutting down 136 branches, (BBC News) part of a broader trend where banks are closing physical locations due to the rise of digital banking. But the question is, is this really the best move? Should we let technology take over all aspects of our lives, or is there still a need for face-to-face services? We’re also seeing more and more tech offshoring (here) as the banks strive to cut costs too.

Let’s take a closer look at how things have changed and what this all means for the future of banking.

How We Got Here: A History of Branches

Remember a decade ago when towns were bustling with bank branches? One of our directors lives in a small town that, just 10 years ago, had an HSBC, Lloyds, Halifax, Barclays, Natwest, Portman Building Society, and Nationwide. Today? Only Lloyds remains. The others have closed, and the town feels a bit emptier without them. What happened?

Well, it’s all about technology. More and more people are shifting digital – apps, online etc. We carry less cash, we pay for things using our phones, and even cheque deposits are a thing of the past, thanks to smartphone apps.

Banks have noticed this shift and are responding accordingly, with fewer branches and more online services. And yet, it’s not all smooth sailing. When Natwest ran its “my bank’s become a wine bar” campaign back in 2001, they were defending their decision to keep branches open. Fast forward to today, and even Natwest is closing locations. The message is clear: the traditional way of banking is changing, and banks must adapt.

Technology vs. Personal Touch: Should We Care for the Bank?

Technology has made our lives easier in so many ways, and banking is no exception. For many of us, banking apps, online transfers, and mobile payments are all we need. So, when banks shut down branches, it’s easy to see why some people think it’s just the natural progression of things. After all, who wants to pay for a branch that they only visit once every five years?

However, this shift isn’t without its problems. For one, not everyone can or wants to bank online. Vulnerable groups, like the elderly or those without access to modern technology, may find themselves left out in the cold. And while it’s true that running a branch is expensive, there’s something about having a local bank that just feels… right. It’s been there for decades, and suddenly, it’s gone.

But here’s the catch: banks are businesses, not charities. They’re there to make money, and if there’s not enough demand for a branch, they’re not going to keep it open at a loss. This might be harsh, but it’s the reality of business. Similar to how public transport gets cut back when no one is riding it, banks must consider supply and demand. There comes a point when the costs of maintaining branches outweigh the benefits. And when that happens, it’s hard to justify keeping a branch open just for nostalgia’s sake.

The Solution: Hubs – A Step in the Right Direction?

So, what’s the answer to this dilemma? Well, one potential solution could be the creation of banking hubs. These hubs would bring together multiple banks under one roof, providing essential services for customers of different financial institutions. Instead of every bank having its own branch, why not have one shared space for everyone? It’s an idea that makes a lot of sense in a world where people are using fewer physical branches.

The idea behind banking hubs is to make banking services more accessible while keeping costs low. Banks could share space, reduce overheads, and still provide the essential services customers need. But there’s a catch: these hubs need to offer something useful. If they’re just a glorified ATM station, they won’t cut it. The problem is where this has been done, it’s a case of ‘oh there’s only an employee here from Barclays 1 afternoon a week’ – this isn’t good enough. Customers need to know they can walk into a hub and get the help they need – whether that’s withdrawing money, making a deposit, or dealing with disputes.

What They Can Can Do to Make This Work

To make banking hubs successful, banks will need to step up their game. First, they need to ensure that the technology behind these hubs is top-notch. They should have easy-to-use interfaces that work seamlessly across different banks, so customers don’t have to struggle with clunky systems. Imagine walking into a hub and being able to do everything you could at your regular branch, but with the added benefit of using a shared space for multiple banks.

Second, they need to collaborate more. The idea of one bank sharing a branch with another may sound strange, but there’s no reason why this couldn’t work. Think about how ATMs already work across different banks. If one ATM can service customers from several banks, why can’t other services follow suit? It’s all about creating a consistent experience for customers. And while not every service can be shared, there’s no reason why something like a customer service desk couldn’t be staffed by someone who’s trained to help customers from any of the partner banks.

In fact, it could be a win-win situation for both banks and customers. If the costs are spread across several banks, it could make keeping these hubs open far more affordable, reducing the need for individual branches. Plus, customers would still have access to face-to-face services when they need them most. We’ve dealt on a technical level with bank systems (here) – it’s difficult when you know when you’re talking to the right people, but it’s even worse when you’re in a 45 minute queue for the wrong department.

The Role of the Government

If banks can’t or won’t make this work, there’s a chance the government could step in. We’ve seen similar situations before, where public funds are used to subsidize services that are essential for the community. The last thing we want is a government-run bank system that ends up being inefficient and costly. With billions spent on infrastructure, it would be a far from ideal solution. We’ve talked more about this before here – government, IT projects and infrastructure just don’t seem to work.

That’s why it’s crucial that banks figure this out themselves. There’s a delicate balance between keeping costs down and making sure everyone has access to the services they need. I suspect there’s an element of pride and not wanting to open themselves up to collaborative thinking. If, we, as Santander, are going to have our name above the door we must control everything. But it’s not going to cut it. The key is collaboration, making sure that banks don’t just focus on their bottom line, but also on the needs of their customers.

Final Thoughts: The Future for the Bank

In the end, technology is great, but there are still times when you just need a human touch. While banking apps and online services are efficient, there are still some things – like disputes or complex transactions – that are best handled in person. Banks should work together to ensure that people have access to these services, whether it’s through shared branches, banking hubs, or other creative solutions.

So, what do you think? Should technology replace all traditional banking services? Or do you still want the option to walk into a local branch when the need arises? It’s a tricky balance, but with the right approach, banks can evolve while still meeting the needs of their customers. And it’s time for them to step up before the state does, and find a way to work together. And hey, they can always get in contact with us if they need a bit of help.