Bank closings are continuing at a frenzied pace in the United Kingdom. Since January 2015, more than 1,000 branches have been shuttered, with HSBC closing 27% of its branches and Lloyds Bank closing 14%, according to a new analysis by the Which?, a major U.K. consumer research firm.
Adding to the damage, Lloyds has already announced that it may have as many as 200 additional location closures for 2017.
Among large banks, these two financial sector giants were followed by RBS (10%), Barclays (8%), and Santander (8%). A smaller institution, The Co-operative Bank, has shut down a staggering 53% of its physical locations over the past two years as it — like the rest of the world — adjusts to a world in which more and more transactions are done digitally.
“Overall footfall in our branches has fallen by over 40%, with 93% of contact with the bank now completed by telephone, internet, or smartphone — plus 97% of cash withdrawals are made via an ATM,” an HSBC representative told the BBC. “When we do make the decision to close a branch, our main priority is to ensure that our customers and their banking needs are catered for in the best way possible.”
While bank closings are somewhat just a sign of the times — and highlights the opportunities present in the market for digital-native fintech startups — a recent Business Insider report highlights why banks need to tread carefully as they chase higher efficiency.
Shutting more and more branches will reap some major overhead savings. But it also may further splinter the already-fragile loyalty that many clients now have with their banks, says the organization.
Thus, the speed to digital transformation for large legacy banks is becoming increasingly important as they start to lose the physical branding and operating model advantages they have historically had over their online competition.
“Banks that don’t act fast are going to lose relationships with customers,” state the report from Business Insider. “Consumers are increasingly opting for digital banking services provided by third-party tech firms. This is disrupting the relationships between banks and their customers, and banks are losing out on branding and cross-selling opportunities. For many banks, this will require further commoditization of their products and services.”
Photo Credit: Hakan Dahlström Photography