Bank branches on the high street set to halve in number
According to global real estate firm Jones Lang LaSalle, a shocking 50% of bank branches will close within the next 8 years, as banks look at new ways to engage with their customers.
The report highlights that changes across the global retail banking environment continue to be driven by political, economic and technological trends with increasing customer demand for innovation, flexible service capability forcing banks to actively managing their brand’s presence on the high street.
James Brown, head of EMEA Retail at JLL said: “Historically, a retail bank’s sole customer sales and service channel was through a large branch network. The rapid ascent of telephone, online and now mobile banking continues to accelerate change and innovation into the retail and banking industry.”
“Whilst we are still seeing new entrants opening physical branches, our research highlights that most developed markets across America and Europe are ‘over-banked’. We predict that as a result of ‘right-sizing’ and embracing technology, 50% of retail branches in these developed markets will be obsolete in their current format by 2020.
This report comes at a time of when perceptions and attitudes towards banks are changing, following recent scandals that have hit the sector.
Issues with the miss-selling of payment protection insurance (PPI), which will cost the industry £9bn in repayments, to the more recent rigging of LIBOR, the rate in which banks lend to each other – banks have been facing pressure to become more ‘user friendly’.
Campaigners for reform of the retail banking sector are calling for more ‘challenger banks’ to rival the high street’s ‘top 5′ banks – Barclays, Lloyds, HSBC, RBS and Santander. The Government has also recently said that it is committed to looking at ways that the sector can be more competitive to give the customer the best choice.
However, JLL state that it is unlikely that the bank branches are unlikely to disappear overnight, but the trend will be ‘one of a steady run-off as property leases expire’.
The firm say that the challenge for banks is that while they try to operate in this multi-channel environment is that they will need to seek out the right locations to a maintain presence to the consumer. There will be more of an emphasis on ‘right place, right space and right price.’
This comes at a time when banks are also facing increasing competition from other retailers – with Tesco, Marks and Spencer’s and more recently Asda entering into the personal finance market.