Have banks finally learned to share?
Not so many years ago, I couldn’t have imagined that I would ever stop buying albums or films. In fact, I would have been wise (seemingly, at the time) to buy stocks in HMV, considering how much money I funnelled into their cash drawers.
But the world has changed. Spotify and Netflix sparked a seismic shift in our ideas of ownership when it comes to media, and many other industries were already there or have been quick to follow suit. We share office space with colleagues or strangers. We store our valuable data on shared servers rather than buying hard drives. People even use services to share cars with others in their local area. And on and on.
This is the age of the sharing economy.
This sharing of resources and infrastructure to serve a wider customer base has disrupted many established industries and given birth to brand new business models. Models based on the idea of providing, well, pretty much anything, as a service rather than a commodity. The flexibility of these “as-a-service” business models allow businesses to focus on growth while being able to cope with a huge amount of uncertainty.
But what about banking? And more specifically, branch banking? Will this industry be shaken up in the age of sharing?
Meeting the Times
Bank branches have dealt with plenty of uncertainty over the years. They evolved to meet the age of automation and, generally, survived it. But now we are in a new era. Not a cashless one, but certainly one of less-cash. And the pandemic has accelerated this and brought it to our doorstep much quicker than anticipated.
As well as the challenge of reduced footfall (and reduced sales as a result), banks are facing tremendous pressure from digital-only banks, which now account for 35% of all current account switches in the UK (source: pay.uk). In the USA digital-only banks now serve 29.8% of the population, and that could rise to over 50% by 2025 (source: insiderintelligence.com).
So, how can physical branches remain relevant in this time of less usage?
Banks have recognised for a long time that they would need to transform their branch model if they were to be able to keep banking services financially viable in the communities that need them. We have seen initiatives to drive more engagement in branches that include everything from hosting yoga classes and art exhibitions, to serving coffee and putting out dog biscuits. But the results are clear – these projects do not work everywhere. And the outcome is that, in the UK and EU, we have 8000 fewer branches every year.
Of course, it’s never an easy decision to close a branch. The banks are fully aware that every time a branch shuts its doors, a proportion, however small, of its loyal customers are left with a suboptimal experience, because the customer need does not vanish with the branch.
As bank branches and ATMs have closed, many groups and organisations have recognised that a significant portion of consumers and businesses continue to depend on cash and cash services, and have been campaigning to protect the public’s access to cash in the digital age. And beyond cash itself, the many services, support and advice provided at the bank branch are still vital to many individuals and businesses, even if they are used less often.
A New Solution for the Age of Sharing
What if there was another way? Today’s technological society brings new challenges, certainly, but it also brings new solutions. What if technology could help banks continue to offer local, banking focused service to their customers in a way that is financially sustainable?
The reality is, it may no longer make fiscal sense for each bank to have its own presence on every high street. But, in the spirit of this new age of sharing, it may make great sense for banks to share spaces with each other, creating local banking hubs where their customers can access the services and advice that they need, without the financial burden of supporting a whole branch.
This is exactly what has been announced in the UK this week by the Access to Cash Action Group (CAG), which includes all major retail banks, Age UK, Toynbee Hall and the Federation of Small Businesses (FSB). Shared banking hubs will be rolled out alongside free ATMs, enhanced Post Office services, and cashback without purchase.
At Glory, we have believed for some time that a shared approach could be a powerful solution for the banking industry, which was a big driver for our investment in OneBanks. Rather than a shared branch, their technology enables multiple banks to offer services from a single physical location such as a supermarket or convenience store.
Of course, customers still expect a great experience wherever and however they choose to interact with their bank. But advancements in tech mean we can now provide personalised experience even where the physical space is shared. By bringing the power of sharing economy to branch banking, it is now possible to create those experiences and make the branch banking business model sustainable for the less-usage era.
