What the voters want, part two

We need face-to-face banking—and that means branches

October 14, 2018
A pedestrian walks past a closed high street bank branch. Photo: Amer Ghazzal/Shutterstock
A pedestrian walks past a closed high street bank branch. Photo: Amer Ghazzal/Shutterstock
A pedestrian walks past a closed high street bank branch. Photo: Amer Ghazzal/Shutterstock Last month, the consumer group Which? found that 2,868 bank branches will have closed between 2015 and the end of 2018. That amounts to 60 bank closures a month. The banks say these are necessary changes, reflecting the rise in online banking and the need to ensure they maintain their profit margins.

But the Financial Conduct Authority recently found that people living in rural areas of the UK, such as in my constituency, Bishop Auckland in County Durham, are far less likely to use online banking than those who live in urban areas.

The reported take-up rate for mobile banking in rural areas is 23 per cent, compared with 45 per cent for urban areas, while the take-up of internet banking is 54 per cent in rural areas, compared with 78 per cent in urban areas. The issue is further complicated by the poor broadband services and patchy mobile coverage offered in rural areas.

When HSBC decided to close the last bank in Shildon, a town of 10,000 people in my constituency, the mean-spiritedness of the bankers was fully on display. We asked them to make a £10,000 contribution to the local credit union, but they could not afford that. Meanwhile, John Flint, the new chief executive of HSBC, will be on a measly £2.9m before bonuses.

Now Barclays is closing its branch in Spennymoor, while RBS is closing its branch in Barnard Castle, and there is a petition in Barnard Castle and Teesdale, as many local people, small businesses, charities and churches ask: “How are we going to manage?” They are outraged that, even though we own RBS, the government fails to put controls on what the bank does.

This is a blatant market failure and it is contributing to financial exclusion in my constituency and in small towns and rural Britain.

Older generations face significant challenges too.

Age UK, the UK’s largest charity working with older people, has shown that these generations have a strong preference for in-branch banking. They like face-to-face service and the security of receiving a paper record to prove their transaction has taken place. Age UK also maintains that for many older people, going to the bank is part of a routine that gets them out of the house, into their town centre and passing time with other people.

So the closure of banks is a huge challenge which the government urgently needs to address.

"This is a blatant market failure and it is contributing to financial exclusion in my constituency and in small towns"

One solution would be to change the competition rules to allow banks to share premises. This would enable them to save money, but bankers argue that it would be a breach of competition legislation. That tells me that the competition legislation and the competition authority’s mandate are wrong. There should be a public interest test as well as a competition test so that the banks do what they are meant to do: serve the public.

Another option would be to establish more mobile bank branches, which are popular among older people.

Of course, having a dozen vans going around representing all the individual banks would be incoherent and difficult to implement. Again, the sharing of services would be a useful and necessary step.

The rate of bank closures is, at the moment, far too high and the only services offered as compensation are online banking services, which alienate many people around the country.

It is time that the government acts to offer alternatives, by allowing for shared bank branches and a wider rollout of mobile branches, to ensure that people in rural areas and elderly people do not find themselves excluded by the unfettered forces of the market.

  Read more from our financial inclusion supplement
Banking on Change is a publication which examines how we can develop a comprehensive policy approach towards financial inclusion. The report features contributions from the likes of John Glen MP, Peter Dowd MP, Anne Pieckielon, Chris Pond and Guy Opperman MP.To find out more about how you can become involved in Prospect’s thought leadership programmes, please contact you want to learn more about you can download the whole  Banking on Change report as a fully designed PDF document. To do so, simply enter your email below. You’ll receive your copy completely free—within minutes. [prosform fields="email,forename,surname" signupcode="Banking" countrycode="GB" redirect="other/banking-on-change-is-yours"]When you sign up for this free report, you will also join our free Prospect newsletter.Prospect takes your privacy seriously. We promise never to rent or sell your e-mail address to any third party. You can unsubscribe from the Prospect newsletter at any time.