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The UK’s largest retail banks have reached an agreement on providing shared banking hubs, but will it be enough to steady the country’s dwindling access to cash?
The collaboration, which is being achieved via the Access to Cash Action Group (CAG), will be coordinated through ATM network LINK, which has also committed to providing reviews into the impact that the change in banking provision will have for different communities.
The announcement means that new shared banking hubs will be opened in Acton (West London), Brixham (Devon), Carnoustie (Angus), Knaresborough (North Yorkshire) and Syston (Leicestershire).
These follow on from existing hubs based in Rochford, Essex, and Cambuslang, Glasgow.
According to a LINK spokesperson, banking hubs are in essence a Post Office used exclusively for financial services: “The main desk is manned by a PO employee who’ll manage all simple transactions like cashing in cheques or paying in money.
“Every day, a personal banker from one of the major high street banks is there to manage more specific issues, such as savings accounts or power of attorney. They are branded as Post Office bank hubs.”
Free-to-use ATMs will additionally be set up in: Betchworth (Surrey), Bo’ness (West Lothian), Brentwood (Essex), Hugh Town (Isles of Scilly), Low Fell (Tyne and Wear), Merthyr Vale (Mid Glamorgan), Mosborough (South Yorkshire), Norwich (Norfolk), Putney (London), Woolhampton (Berkshire), and Woodbury (Devon).
“Our relationship with cash is changing but the UK is not ready to be a cashless society, and free access to cash remains vital for many consumers and communities,” said John Howells, chief executive at LINK, noting that the institution will continue to ensure the UK’s cash needs are met.
This new project follows LINK’s work already on the Cash Without Purchase pilot, which has been extended to allow customers to access cashback services from 2,000 retailers. Cardholders can withdraw up to £50 without needing to make a purchase or pay a fee.
‘Great news’
The new banking hubs have been largely welcomed in the payments community.
“The recent news on major UK banks collaborating to provide ATMs or shared banking Hubs where communities need continued access to banking services is great news. We are all too familiar with branches closing day in and day out,” said David Royle, a payments consultant and director of Strategic Resource Management.
They are expensive to run and are rapidly declining in usage, all the more accelerated due to COVID-19, he pointed out. This is reflected in Strategic Resource Management’s own research, which revealed that customer demand for bank branches has dropped by nearly 10 percent since pre-pandemic levels.
“The brick and mortar retail banking infrastructure has been built for a world with much higher levels of demand for cash, so banks can't sustain their existing model forever as the use of cash declines,” said Kristine Appleton, consultant at Frontier Economics.
Yet, Appleton continued, a substantial minority of customers still want to use physical banking services. “With this commitment, the banks have shown that they are willing to adapt to the needs of their customers in a world with a smaller, but still present physical footprint.”
Whether this initiative is a success or failure has yet to be determined.
"It is early days, but the concept here is very sound,” said Giles Custerson, a payments specialist at HAL Consulting. “It expands on some of the traditional Post Office services and allows people to pay in cheques, deposit, and take out money.”
For Custerson, however, the question mark is not over the service they provide but more whether these hubs can generate sufficient revenue to make them a viable replacement.
Historically, the branch network was an important place to communicate with customers and was seen by banks as an opportunity to engage and cross-sell their products, he continued. “The amount of money able to be generated has become more challenging. The size of many of the old high-street bank branches makes them no longer commercially fit for purpose.”
What is interesting is that none of the newer challenger banks have entered the debate yet, even though they still have customers, and still hold people's money, said Custerson. “I think that there should be some onus on any institution holding cash for people to also be responsible for giving them access to it."
Entry into this debate could be important for the future prospects of a challenger bank, Royle pointed out. “Branches have a real impact on brand awareness, and the likes of First Direct have continuously had the best or near best customer service but have never scaled without the brand awareness of the high street.”
A similar limiting effect will have an impact on the digital-only brands such as Monzo and Starling, and they will need to find different ways to maintain their appeal and grow, he commented.
Bank closures
Bank closures have occurred at a spiralling rate in the UK. Since January 2015, banks and building societies have closed or scheduled the closure of 4,734 branches — something which has sharply increased following the advent of COVID-19.
Which?, the consumer rights group, has found that the rate of bank branch closures significantly increased in 2021. Between June and August, 298 branches closed their doors.
This was part of an overall 736 bank branch closures this year, while another 220 are set to close in 2022.
UK Finance data also shows that the overall number of ATMs in the UK declined 21 percent between 2016 and 2020, from 70,020 to 55,563.
“Once the infrastructure is up and running to ensure that access to cash will not be a problem for the foreseeable future, regulators should start thinking about what happens in the long term when demand for cash may dwindle to very low levels,” said Appleton, discussing the hubs.
Although cash usage continues to decline sharply, digital payments and contactless transactions have filled the gap.
In 2020, for example, the number of contactless payments made in the UK increased by 12 percent to 9.6bn and, in the last four years, contactless spending has jumped from 7 percent of all payments to 27 percent, according to UK Finance.
“The focus should now shift to digital inclusion and ensuring that nobody is left behind as the world increasingly embraces the digital economy,” said Appleton.
