Exponential Close: Lloyds to close more branches as banks go digital

July 20, 2021

2 min read

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What's going on here?

Lloyds Banking Group is to close another 44 branches, blaming a lack of customers at such sites as people move to digital banking.

What does this mean?

The move comes in addition to previous announcements from Lloyds Banking Group, whereby 56 of their branches were closed between April and October 2020. The new set of closures will take place between September and November 2021, with 29 Lloyds Bank and 15 Halifax branches to go. This latest episode of branch-trimming follows similar announcements from Santander (111 branches closing by the end of August) and HSBC (82 branches closing by September) in recent months. However, many have opposed the move, with Unite union national officer Caren Evans stating that “Unite does not view the branch network as a disposable commodity and the union believes that the branch network has value far beyond its immediate commerciality”.

What's the big picture effect?

This latest round of branch closures forms part of a wider shift to digital banking that began even before the pandemic. Customers are growing to prefer the convenience of digital-first service provision, with 76% of British citizens using e-banking methods in 2020 following a 33% increase between 2007 and 2017 (according to consumer data company, Statista). With COVID-19 having undoubtedly accelerated this trend, traditional banks are looking to online challenger banks (such as Monzo and Starling Bank) to become more efficient by equipping themselves with Fintech tools. This can range from chatbots to enhance customers’ experience, mobile apps to give customers real-time looks into their bank accounts, and machine learning to secure against fraud. Together, these tools now allow banks to expedite processes that once took days, weeks or even months. This will continue to facilitate unprecedented use of online banking channels as today’s customers can now bypass traditional branches when applying for a loan or even a mortgage.

Such widespread branch closures will further fuel debate over the need for brick-and-mortar investment on the High Street and indeed the retail sector as other industries, such as social activities and online shopping also continue to move online. Real estate lawyers may increasingly be tasked with reviewing leases and potentially negotiating exits from these leases with commercial landlords. Furthermore, a NCSC (National Cyber Security Centre) 2020 survey revealed that over 50% of the British public worried about potential cyber risks in using digital banking channels. This suggests that data protection lawyers may also be called upon by banks to ensure personal data is protected, as banks seek to digitise their services.

Does this mean that digital banking will eventually replace in-person banking? Not entirely. Digital banking channels cannot cover all aspects of advice that consumers can gain from human interactions at a bank branch. This is especially significant when it comes to life events such as buying a home or establishing a wealth plan, as many people still need to feel reassured face-to-face. However, it would be unreasonable to expect a complete return to pre-pandemic ways of banking as more and more customers will expect the ability to choose from a menu of digital banking services as standard. The banking landscape over the next decade or so may therefore come to be characterised by a hybrid approach between both digital and in-person banking channels.

Report written by Charlie Parkman

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