Why the exodus of banks from the high street will continue

Lender vows to buck the trend, despite bank closures

Why the exodus of banks from the high street will continue

Banks won’t backtrack on a strategy of closing high street branches, a building society executive claims, saying it’s a business model that doesn’t allow for “people and personality”.

Steve Fletcher (pictured left) is chief executive of Vernon Building Society. The lender works closely with mortgage intermediaries, offering bespoke lending solutions to first-time buyers, homemovers, remortgagors, retired borrowers, buy-to-let landlords and self-build clients.

Vernon Building Society has declared its ‘unwavering commitment’ to the high street, and will consider opening new branches if there is demand.

Fletcher’s comments to Mortgage Introducer come as a new report warns that 30 UK towns and villages could be left without a bank in 2024.

The study was released by Eligible, a digital platform that uses AI to help lenders support financially vulnerable customers. It draws on research from Link, the chain of hole-in-the-wall cashpoints, which tracks the closures of banks. It reports that since the beginning of 2015 almost 6,000 branches have closed, with scores more scheduled to close this year.

It suggests there is a divide between rural and urban areas, with the majority of towns and villages with only one bank largely found outside of metropolitan areas, creating so-called ‘banking deserts’.

“Take a look around,” declared Fletcher. “It’s true. Not just banking deserts too. I grew up in a district of Leeds where at the bottom of the road was a shop parade with all the traditional outlets. I worked in the local greengrocers and remember the owner telling me the opening of a big shiny supermarket a mile or so away would be the death of the parade. He was right.”

The CEO added: “I can’t see banks ever backtracking now on branches, they’ve gone too far and couldn’t justify the costs of setting up branches. They don’t want to provide anything other than ‘stack it high and sell it cheap’ banking and there is no place in that model for people and personality. That business model will work for a lot of people and there is clearly a big market which all the big banks and especially the new entrants are chasing. But it’s not ours.”

Will banks open new high street branches?

While other banks and building societies are disappearing from high streets, the Stockport mutual remains dedicated to the communities it serves and is mid-way through a £1.1 million investment into its high street branch network. It says it’s open to potential new branch locations, collaborations and banking hubs in the future.

Fletcher continued: “When you consider banks are driven by shareholder return, you see why they have exited branches in rural areas, they don’t make financial sense. For mutuals though, there’s other non-financial factors at play. If we were starting from scratch we perhaps wouldn’t open all our current branches. But we’re not, we’ve been going for 100 years and we know our members and communities value our presence and we know that together, we’re greater.”

Zahra Hassan (picture right), banking expert and a co-founder of Eligible, believes the biggest challenge facing UK banks and lenders is a persistent lack of consumer trust.

“We’ve seen alarming statistics over the last 12 months suggesting consumers don’t believe financial institutions act in their best interests, with many opting to get their advice from Google or social media,” Hassan observed. “People still lack real connection with their providers – and that’s a problem.

“It’s a huge concern for consumers living outside of big metropolitan areas, particularly because we’re also seeing a surge in closures for suburban bank branches. With an already pervading lack of trust, taking away an institution’s physical presence is liable to make consumers more anxious.”

Could the government intervene in the closure of bank branches?

Hassan is urging politicians to step up to help those most affected by branch closures.

“When it comes to supporting banking in less densely populated areas of the UK, it’s incumbent on Westminster to make sure safety nets are in place for society’s most vulnerable,” she stated. “For those without access to modern, digital options or the capacity to use them, there must be alternatives to the local bank branch available – or at least a requirement for additional support and assistance.”

She added: “The real question hangs on how a change in government might impact policy in terms of development, social equality and fairness.”

Eligible describes itself as a consumer-first mortgage servicing platform, leveraging AI to educate and empower consumers to achieve good outcomes. Working with UK banks and lenders, it helps them meet their obligations under the Mortgage Charter and Consumer Duty.

It aims to eliminate stress and anxiety for mortgage consumers, helping them make informed decisions, while reducing complaints, call-centre support costs and increasing back-book revenue. Hassan identifies accessibility as a long term issue in banking, but says the changing landscape is an opportunity to completely reform consumer interaction.

She noted: “The risk of not doing this is missing opportunities to facilitate good outcomes and pushing consumers yet further away from the expertise these institutions have to offer. Responsive and personalised experiences should already be standard, but the industry is still lagging behind most other sectors on this.”