The verdict is in: banking centers are a good thing. Small businesses and retail clients liked trial schemes where main street banks pooled resources to serve clients in remote corners of the UK. Feedback, according to to Community Access to Cash Pilots, is “amazingly good”. Happy customers and supporters are asking for hundreds more.
It is useful for the main street banks. They need a free ticket to get out of jail. Regulators are on their backs to stop cutting branches. A decade-plus scrap it pruned the number of outlets from 11,355 in 2012 to just 6,965 last October.
Rather than maintaining expensive bricks and mortar in sparsely populated places, they can share the burden. For example, at one pivot point, the big five banks each man the fort one day a week. Business is small and basic: two-fifths of all transactions are deposits. Profits will be equally small.
Some carp that allow hubs to bank out of their duty to ensure accessibility for all customers. But other utilities join forces. Consider cell phone masts. Vodafone has entered cash flow benefits of € 800 million over 10 years from its 2019 network sharing agreement with Telecom Italia.
But it is becoming more difficult for banks to justify cross-subsidies for Cinderella services such as branches. Online fintechs offer more services for free to customers, which puts pressure on banks to make their offers more attractive. Witness, for example, the withdrawal of US banks from levy overdrafts, a revenue stream that strengthens low-cost checking accounts.
Retail banks, and their regulators, need to rethink business models. This is not just due to competition of emergence. Cash was in the wheels, according to FIS / Worldpay, used in just 13 per cent of UK point-of-sale transactions in 2020, and less than a tenth in Sweden, Hong Kong and Australia.
Digital wallets and schemes like “buy now, pay later” are gaining market share. High streets themselves are deteriorating. Banking centers are not without problems – there is the issue of data sharing. But they represent a useful short-term solution.
The Lex team is interested in hearing more from readers. Please tell us if you think banks should be required to provide physical branches in the comments section below.