The decline of high street banks
The presence of traditional bricks and mortar banks has been in decline for some years now, and financial institutions have been feeling the pinch. A recent report by Which? suggests that banks and building societies have closed (or are scheduled to close) 5,579 branches since January 2015, at a rate of around 54 each month.
The NatWest Group, which comprises NatWest, Royal Bank of Scotland and Ulster Bank, will have closed 1,299 branches by the end of 2023. Lloyds Banking Group, made up of Lloyds Bank, Halifax and Bank of Scotland, has shut down 926 sites, rising to 1,007 in 2023. Barclays is the individual bank that has reduced its network the most, with 1,029 branches closing by the end of 2023.
Why are so many bank branches closing?
The way consumers bank has changed dramatically over the past few years. One of the biggest factors is declining footfall in physical branches, which has been driven by the increasing popularity of online and mobile banking, meaning that fewer people visit branches.
With the rise of digital banking and less footfall in high street branches, many banks have been forced to mitigate these challenges. They have had to carefully evaluate which branches to close or consolidate to reduce their branch footprint, taking into account several factors such as footfall, local demographics and the availability of alternative banking services nearby.
Real estate rationalisation
When bank branches are no longer being used as much as they once were, financial institutions face some tough decisions in order to reduce capital costs and adapt to changing consumer behaviour. Real estate is typically the largest annual operating expense, after people, so it’s a significant drain on resources.
Real estate rationalisation requires a comprehensive decision-making approach. Many banks are burdened with significant ongoing operating expenses and capital costs with regard to owned and/or leased real estate, which was once pivotal to support day-to-day operations. The real estate might span thousands of square feet, contributing to a significant fixed cost base and the potential for suboptimal utilisation.
By consolidating branches and reducing the number of physical locations, banks can reduce expenditure on lease agreements and rent, utilities and other expenses associated with maintaining a physical footprint.
Access to cash
However, property rationalisation of high street banks is not without its issues. One of the biggest challenges is the need to balance cost savings with maintaining a physical banking presence in local communities. For many people, a physical branch is still an important part of their banking experience. Bank closures risk preventing many customers who favour the traditional way of banking from accessing cash and face-to-face banking services. Not everyone is able to or wants to go fully digital with their banking services, so it’s critical that these communities are still supported.
According to the numbers from Nationwide Building Society, the amount of cash withdrawn from ATMs increased 19% in 2022 for the first time in 13 years as people attempted to avoid going into debt during the cost of living crisis.
The Financial Conduct Authority (FCA) is also putting pressure on banks; they will be given new powers to ensure people can still easily access and deposit cash, as the digital revolution forces branch and ATM networks to shut down. In May 2022, the government said it would legislate for the FCA to ensure banks allow consumers to access cash and make deposits within a reasonable distance from their homes.
The banking industry is collaborating to meet government and customer demands for a retained physical presence, and NoteMachine is a partner of choice to government and industry for the future of cash infrastructure.
Financial institutions face the challenge of how they can digitise their current services, whilst reducing overheads, remaining present for customers and still facilitating cash withdrawals and deposits. NoteMachine has found the solution, with AXIS hubs.
NoteMachine understood the market’s requirement for an outsourced solution for alternative banking services. Access to cash is all about choice: consumers and businesses want the option to choose how they manage their costs and cash flow.
AXIS hubs offer a ‘plug-and-play’, fully functional banking facility via their transaction processing platform. They are purpose-built structures that can be located almost anywhere, in sites such as shopping centres, retail parks or supermarket car parks.
The AXIS scheme enables banks to have a different presence in the UK market, providing customers with an alternative cash withdrawal and deposit solution, as well as face-to-face banking services.
NoteMachine’s managed services
NoteMachine’s infrastructure also enables an end-to-end managed service solution for banks, from processing transactions, through to ATM hardware provisions and servicing ATMs. NoteMachine can help financial institutions focus on what is core to their business, while ensuring a strong base of operational excellence, security and service quality.
Out of the 55-60,000 ATMs currently in the UK, NoteMachine owns 10,000 of them, supplying around 20% of the cash dispensed from all ATMs.
As visits to branches continue to fall, banks need to look carefully at where and how they show up to provide the best service for their customers. AXIS hubs offer face-to-face support, enabling locations that close a branch to maintain a presence in that community still, as well as offering the all-important cash withdrawal and deposit facilities.
It is possible for banks to rationalise their property portfolio without damaging customer service standards. By exploring alternatives like AXIS hubs, banks can adapt to changing consumer behaviour and remain competitive in an increasingly digital world.