AltFi Insights: New bank applications and online shopping hollow out high street bank network

By Roger Baird on Monday 8 April 2019

Digital Banking

High street banks have closed 20% of their branches over the last two years.

AltFi Insights: New bank applications and online shopping hollow out high street bank network
Image source: Pixabay

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When peer-to-peer lender Zopa launches its much-anticipated bank later this year it will be the 41st new lender the Bank of England has approved in six years.

However, the march of digital banks such as Monzo, Revolute and Starling combined with consumer’s increasing use of online services has led to thousands of high street closures that show no sign of ending. British-based Revolut says it has amassed 4.5 million customers across Europe—with 1.6 million in the UK—since it was launched in 2015.

The average bank branch meanwhile received 104 visits in 2017, a 26% fall compared to five years ago, said banking lobby group UK Finance.

The adoption of online banking, which fintechs have encouraged and benefitted from, explains the reason for the decline.

74% of adults used online banking last year, while the number of contactless card payments jumped 97% to 5.6 billion in 2017, compared to the year before.

This has led to the decimation of the British bank branch network.

Over the last two years 1,842 bank branches have shut down, a 20% fall, according to Retail Banker International.

Royal Bank of Scotland, which own NatWest, has closed the most, cutting 52% of its high street outlets to 797. While challenger bank Metro opened 17 new branches over the period to reach 62 in total. Nationwide saw its network fall by 11 over these two years. However, the building society pledged last month that “every town or city with a Nationwide branch today will still have one in May 2021”.

By contrast the Bank of England’s Prudential Regulation Authority approved 13 new challenger banks in 2016/17, 10 in 2017/18, and at least eight since March 2018, with banking observers saying this trend has accelerated since the 2008 financial crisis.

Banks and building societies have announced a further 1,076 of closures in 2018 and 2019, according to consumer magazine Which.

However, the bank branch network has been declining steadily for almost 30 years. The UK branch network stood at 20,583 in 1988, but this had slumped to 8,837 in 2012.

“The public and government have worried over the seemingly remorseless decline in the number of bank branches in high streets and rural areas for at least 30 years,” said a 2018 House of Commons briefing paper on Bank branch closures.

“The forces driving closure programmes are varied, but financial innovation and trends in society towards falls in demand for the use of cheques as a payment means and increased use of electronic payment services have all played their part. The impact of the financial crisis and the new regulatory costs bearing down on profits have made banks look again at the viability of their branch networks.”

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