1st April 2014

Even seasoned insiders are stunned by the pace of banking’s root and branch revolution

Written by Anthony Browne

The seismic decline in the use of banks’ high street outlets is largely explained by a quiet, but dramatic, revolution in the way we spend, move and manage our money. 

Millions of people are embracing mobile phone banking and other easy-to-use technology offered by their bank.

When did you last visit your bank branch? And no, I’m not counting withdrawing cash from the hole in the wall outside. Last week? Last month?

Now, I realise this is a strange confession from the head of the British Bankers’ Association, but I haven’t visited my branch since last year – and I’m not alone.

RBS Group says that there has been a 30pc drop in footfall in its branches since 2010. And Tesco Bank reports that 85pc of transactions are now done via the internet.

The seismic decline in the use of banks’ high street outlets is largely explained by a quiet, but dramatic, revolution in the way we spend, move and manage our money.

Millions of people are embracing mobile phone banking and other easy-to-use technology offered by their bank which gives customers greater flexibility when managing their finances than ever before.

Today we’re launching the first part of a series of studies on the changing face of banking in the 21st century. It’s called ‘The Way We Bank Now’, and if you grew up in the 1970s or before you have every right to be astonished by how much change there has already been.

In those days before the cash machine, withdrawals would usually have to be made at the counter of one of your bank’s branches. If you failed to make it to the front of the queue at your local bank by half past three on a Friday afternoon you could face a weekend of penury.

Back then merely obtaining your current balance was an operation in itself. You would queue up for what felt like an age, trudge up to the counter to ask how much money you had and then wait for the cashier to scribble it down on a piece of paper, before surreptitiously sliding it across the counter.

How times have changed. Some of the figures in our research – the largest industry-wide look into this subject – are mind-boggling. Customers of Britain’s five largest banks used their mobile phones for more than 18m transactions per week in 2013 – twice as many as in the previous year. In all, more than 12.4m customers have downloaded their bank’s app. Several of our largest banks have apps which boast more than a billion uses already.

It seems I’m one of the millions who now find it incredibly useful to be able to check my balance quickly on the train on the way to work, or while having a sandwich at lunchtime. On a typical day this year HSBC customers use their mobile phones 517,000 times for banking services.

Several senior bankers I have spoken to say they are astonished by the strength of the take-up of this technology, which has already led to a noticeable dip in customers contacting call centres.

But mobile phone apps are not the only example of customer-friendly technology being offered by banks. Millions of people are also signing up to receive text messages from their banks that give regular balance updates or warn if a borrowing limit is close to being reached. These useful alerts can ensure that consumers avoid penalty charges. Lloyds Banking Group sent more than 302m of these messages to customers last year alone.

Nearly 40m debit and credit cards equipped with contactless technology have been issued by our largest banks. This is technology that allows people to pay by just flashing their card at a reader, saving time and cutting shop queues.

These innovations give customers greater flexibility than ever before about how they manage their money. They also help puncture the myth that banks innovate only for themselves.

Together these changes help explain why so many high street outlets of our banks are becoming quieter and quieter. This is part of a wider social trend and not just an issue for banks, of course. Many of us love the idea of our local record dealer or bookshop, but we instead opt to buy from a well-known online retailer that delivers goods direct to our door. It would be naïve to think that banks would somehow be unaffected by such change.

This does not mean the branch is dead or dying. Virgin Money, one of those vigorous challenger banks which demonstrate how competitive Britain’s banking market has become, has been actively opening branches.

No, branches will remain at the heart of banking services for years to come – but they will, and already have, begun to change.

Many of these outlets already look and feel very different. All the cashiers in Metro Bank, another challenger bank, use tablet computers. Barclays has more than 1,000 iPads in its high street outlets and says it takes three minutes to open an account on one of these gadgets, compared with around an hour using one of its personal computers.

But the more fundamental change is that branches will no longer primarily be places for day-to-day counter services. Our banks’ high street outlets will – and are already starting to – become places where customers go for those big moments when they want to talk to someone, such as applying for a mortgage, exploring their financial options or resolving a complaint.

That said, there will always be people who want branch-based services even for the most straight-forward of transactions. Banks will be there for such customers – although many might find their local post office a convenient alternative, with several banks having agreements on counter services in place.

But if the astonishing take-up of mobile banking tells us anything it is that many people simply do not have precious minutes to spend in a branch when they’ve got a million and one other things to do. They want flexibility – and banks have to deliver that. That’s why anyone who truly thinks that a vast network of branches is the be-all and end-all of customer service in the 21st century is burying their head in the sand and missing a compelling story about innovation – and one that is gathering speed.

From next month customers will be able to register for Paym, a new service that will allow them to transfer sums to contacts in their mobile phone’s address book with just a few taps of a screen.

Will it be the end of the pub round? I doubt it. Will it make life a little easier when splitting a restaurant bill or getting you out of a fix if you’ve forgotten your nephew’s birthday? Absolutely.

Anthony Browne is chief executive of the British Bankers’ Association

An article in the Business Section of the Daily Telegraph from 31 March.