The acceleration in the closure of bank branches as a result of Covid-19 has been well documented, as banks step up cost-cutting drives and customers shift to digital services.
More than 4000 bank and building society branches have closed in the UK over the past six years, according to consumer group Which. There remains, however, a significant segment of the population for whom access to cash and face-to-face relationships remain important, and regulators have been mulling over rules that would block branch closures in certain areas.
One solution is for banks to share branches. Two ‘bank hub’ pilots in Rochford (Essex, England) and Cambuslang (near Glasgow, Scotland) have recently been extended until at least April 2023, and the organisers behind the project are optimistic that the scheme will now be set up in other parts of the country.
Shared premises
The two hubs, which opened their doors in April, allow five banks to share a premises offering walk-in appointments for existing customers, with each bank allocated one day of the week. Additionally, the UK Post Office provides a dedicated daily counter for basic services, such as withdrawing or depositing cash.
The five slots are allocated to the most popular lenders in each area. The banks in the Rochford pilot are HSBC, NatWest, Lloyds, Barclays and Santander; whereas in Cambuslang, they include the Royal Bank of Scotland, Virgin Money, Bank of Scotland, Santander and TSB.
“The difficulty at the beginning was getting all the banks on board,” says John Bachtler, chairman of Cambuslang community council. “There was a recognition that they needed to do something. The obstacle was thrashing out how to make it work.”
The difficulty at the beginning was getting all the banks on board
Natalie Ceeney, chair of the Access to Cash Action Group, which developed the pilot projects, points out that banks have been collaborating on infrastructure for years. “They work together to carry cash around the country. They work together on payment rails and ATMs. Therefore, working together [to share a premises] was not really a new concept,” she says.
At the Cambuslang and Rochford hubs, the face-to-face services the five banks offer on their allocated days is left up to them. “[The hub] potentially increases competition on that high street because it now has five banks offering different types of services… while at the same time significantly reducing costs for each of the banks involved,” Ms Ceeney adds.
Hybrid approaches
According to Tom Mouhsian, an analyst at Forrester Research, the shared branch model represents one of several hybrid approaches banks are currently experimenting with. “Our surveys consistently indicate that some people are not comfortable with digital-only services and that when they want to discuss their finances, they want to deal with a real person. Different banks and looking at different models to accommodate this need,” he says.
Singapore’s OCBC, for example, has been repurposing its branches on Sundays by providing family-friendly play zones, so parents can come in with children and discuss their finances. Australia’s Bank of Queensland, meanwhile, operates branches via a licensing agreement, which allows local entrepreneurs to use the franchise to offer a wider array of services. “The rationale is that owner-managers understand their communities better and will serve them better,” says Mr Mouhsian.
“The bottom line is that the one-size-fits-all bank branch network is evolving. The actual number of branches is shrinking, but those that remain are looking to meet the needs of customers in different ways. The shared branch pilots [in the UK] are one example of this evolution.”