A regular discussion of mine has resurfaced in recent days: is the branch dead? Why it has returned is due to the announcement of Santander closing a fifth of its UK branch network:
The Spanish-owned bank, which has one of the largest high street networks in Britain, will shut 140 branches, leaving 614 after the closures, which will be completed by the end of the year.
In fact, half of all of the UK’s bank branches have shut up shop in the past decade:
Half of all high street bank branches closed between 2007 and January 2019
|Lender||Branches in 2007||Branches in January 2019||% change|
|RBS (incl Natwest)||2,278||797||-65%|
|Lloyds Banking Group (Halifax, HBOS, BOS)||3,042||1700||-44%|
|Nationwide Building Society||681||676||-1%|
Source: The Guardian
And it is an emotive subject, as evidenced by this article:
Hebden Bridge has long been known for its thriving town centre. But though independent shops, cafes and arts venues are here in abundance, there is one vital lifeline missing – a bank. Last week, the market town’s last surviving bank, a branch of Lloyds, closed its doors for the final time. Now there are no banks within a 15-mile stretch between Todmorden and Brighouse in West Yorkshire’s Calder Valley. For residents like Gareth Parry, who works as a counsellor in the area, the departure is nonsensical. “It’s a fabulously wealthy area. People come here to spend money, but there’s no bank,” he says.
And yet, not everyone believes that this makes sense:
Vernon Hill’s Metro Bank “has counter-intuitively based its business on opening branches — 66 so far — at a time when other banks are closing theirs and moving services online … Metro insists its branches work … (but) the average fit-out costs £3.5m. That is up to seven times more than rivals spend. Can Metro really beat the headwinds?
Some question the cost of Metro Bank’s branch openings, as they are fitted out by Vernon Hill’s wife’s business. That’s what got him into trouble in the USA, but hey-ho.
The real question is whether it makes sense for a bank to open branches in this digital age. Goldman Sachs’s Marcus hasn’t and is doing incredibly well. Marcus attracted two million customers in the USA, depositing over $20 billion and taking out $3 billion of loans in just 18 months. Even more notable was that they achieved 75,000 customers depositing over $2 billion in just over a month after launch in the UK.
Monzo and First Direct have been voted as the best banks in Britain by Which? Magazine and have no branches.
And it is notable that most challenger banks are opening without branches. Why would you open a bank with branches today?
Well, some would say that it’s an investment in trust. If you have no physicality, then how can you be trusted? I guess the answer to that is by having a banking licence you have trust, as it shows you are regulated. But some disagree. I always remember visiting Roberto Ferrari, then CEO of CheBanca! in Italy. He explained that they had launched a digital bank but were opening branches as a way to reinforce trust. Where they have physical branches, they get twice the deposits compared with areas where they don’t. Then, after trust, it’s for marketing, service and advice.
Everyone always tells me you need branches for advice. You don’t. I get advice from Googling. I don’t need a store for advice. However, I do need a store for eyeballing. These days, retailers call it showrooming. You Google the product, then go to a store to see it and then order it online. The trick is to price it so that your store is the one they order it from. That’s why it’s important for a retailer like John Lewis to say it is never knowingly undersold, and will match any price you find cheaper from a high street competitor (whether it’s on their online store or physical store).
I guess the real reason I’m writing this blog is because of the opening of a new style of branch in Britain in the last week: the B Store or, officially, B Works.
B is the new bank brand of Clydesdale and Yorkshire Bank (CYB). Formerly owned by National Australian Bank NAB, the bank was floated on the Stock Exchanges of London and Australia in 2016, and seems to be doing pretty well. They acquired Virgin Money last year and launched B in May 2016.
B brings together a best in class digital platform, a suite of new products, customer driven design and the support of over 175 years of banking history to deliver a service that lets customers take control of their finances no matter where they are.
Its launch follows extensive research among 10,000 potential users over two years which revealed customers wanted a banking service that was simple, intuitive and designed to make managing money as easy as possible to carry out on the move.
B hit my radar a while ago, and their 2018 results show a 30% increase in mobile app users and a 21% uplift in digital sales, contributing to a 6% decrease in costs and a 13% increase in profits . Nice.
But what about their branches?
Clydesdale has 67 branches and Yorkshire Bank 90. But B is different. B has Studio B in London and a B Store in Birmingham. What are they?
Studio B is a “creative, interactive space on Kensington High St in London designed to open minds and inspire the kind of thinking that could shape the future of banking”.
The Birmingham B Store offers:
Self-service areas – Use our digital cash machines, and browse and apply for services easily on in-store mobile devices
Friendly staff – The team are out on the store floor ready to help
A bright, colourful store – an open-plan layout with music and relaxed discussion spaces
Our new approach – booths and rooms available for private discussions about your money
Meetings of minds – we’ll be hosting group events and making meeting spaces available to business customers
Then there’s their newest store in Manchester, B Works, which opened last week to the headline: Could Zumba and coffee save the dying bank branch?
The bankers are trained baristas and will be able to pour you a silky smooth flat white as they chat about your accounts. The space is free to use even if you’re not a customer. Anyone, from students and start-ups to SMEs and the self-employed, can make themselves comfortable in one of the brightly coloured seats and make use of the free coffee and Wi-Fi. The bank has a photo and audio studio where you can use tripods and cameras or learn new social media skills. You can also host events, book meeting rooms or meet an advisor for business advice.
Yep. The bank branch is dead.
A customer enters a bank’s head office.
Mr. Praline: Hello, I wish to register a complaint.
(The concierge does not respond.)
Mr. Praline: Hello, Miss?
Concierge: What do you mean “miss”?
Mr. Praline: (pause) I’m sorry, I have a cold. I wish to make a complaint!
Concierge: We’re closing for lunch.
Mr. Praline: Never mind that, my lad. I wish to complain about this bank branch what I invested in not half an hour ago from this very bank.
Concierge: Oh yes, the, uh, the Northern Rock … What’s, uh …What’s wrong with it?
Mr. Praline: I’ll tell you what’s wrong with it, my lad. It’s dead, that’s what’s wrong with it!
Concierge: No, no, it’s uh … it’s resting.
Mr. Praline: Look, matey, I know a dead bank branch when I see one, and I’m looking at one right now.
Concierge: No no it’s not dead, it’s resting! Remarkable bank, the Northern Rock, isn’t it, ay? Beautiful security!
Mr. Praline: The security doesn’t enter into it. It’s stone dead.
Concierge: Nononono, no, no! It’s resting!
Mr. Praline: All right then, if it’s resting, I’ll wake it up! (shouting at the branch) Hello, Mister Money Banks! I’ve got a lovely fresh pensioner customer for you if you show… (concierge hits the branch)
Concierge: There, it moved!
Mr. Praline: No, it didn’t, that was you hitting the wall!
Concierge: I never!!
Mr. Praline: Yes, you did!
Concierge: I never, never did anything…
Mr. Praline: (yelling and hitting the branch repeatedly) HELLO BANKER!!!!! Testing! Testing! Testing! Testing! This is your nine o’clock alarm call!
(Takes branch and thumps it on the counter. Throws it up in the air and watches it plummet to the floor.)
Mr. Praline: Now that’s what I call a dead bank branch.
Concierge: No, no…..No, it’s stunned!
Mr. Praline: STUNNED?!?
Concierge: Yeah! You stunned it, just as it was wakin’ up! Northern Rocks stun easily.
Mr. Praline: Um…now look…now look, mate, I’ve definitely had enough of this. That bank branch is definitely deceased, and when I purchased it not half an hour ago, you assured me that its total lack of movement was due to it being tired after a prolonged financial crisis.
Concierge: Well, it’s probably pining for the old days.
Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...