With physical bank branches disappearing, how will the UK’s move to digital finance play out?

Earlier this year, on February  22nd,  the last remaining bank branch in the whole of the Peak District, Natwest in Bakewell, closed its doors for good. The closure leaves thousands of locals without a physical bank to visit, with the closest Natwest, for instance, now in Chesterfield—almost a half an hour’s drive away. 

Brick-and-mortar branches have been disappearing from Britain for a while. But their departures from the Peak District is a particularly significant omen, marking one of the first instances an entire UK region has gone bankless. Meanwhile, the use of physical cash is also waning. Latest figures show 21.6 million people use cash either just once a month or not at all, instead preferring credit and debit cards. 

The country is clearly marching into a digital-first financial future. But how might this move progress? And will we ever see a bankless, cashless Britain? Let’s take a look. 

The decline of in-person banking

Government data shows that there were 21,643 bank branches and building societies in the UK in 1986, falling to 7,400 in 2022. However, according to new 2024 research from Savills and Experian, this figure has now fallen to below 6,000— with a net decline of almost 50% in bank units in the UK since 2014.

A House of Lords study on the topic states that the “decline of bank branches in the UK has been attributed to banking consumers’ changing habits and technological changes.” The Chief Executive of Barclays UK has supported these claims, stating in a letter to the government: “Profound technological changes, and the ease with which customers can access their accounts digitally, means that our physical branch network is experiencing a sustained fall in demand. In fact, the majority of our customers (74%) now choose to interact with us via telephone, online, or mobile banking.” Similarly, TSB Bank told the government that “over 90% of our transactions are now being done digitally and over 67% of all our customers are now using mobile, online or telephone banking.” 

But ask your friends and family—particularly the elder members—and many will say they still prefer to use cash and visit a branch in person. Often, the division between physical and digital often isn’t as clear-cut as the stats claim. That’s why many businesses are aiming to soften the transition, and make sure the two financial avenues sit hand-in-hand, rather than at odds, with each other. 

Are the alternatives to branches adequate? 

In response to branch closures, many Post Offices are opening Banking Hubs, in which customers can still use cash withdrawal and deposit services. On a set day of the week, customers can also access support with more complicated transactions like mortgages, loans, and pensions. 

However, are these Hubs going to be sufficient? The idea behind them is to drive down the cost of running a full bank, so they typically feature far fewer services, which could result in poorer customer experiences. Customers may be happy transferring small amounts of money digitally, but they might still want urgent in-person support for large transactions, rather than have to wait for a specific day. Plus, accessibility issues may continue, with not every town or village containing a Post Office, either.

Simply, not everyone wants to bank online, both from a trust and social perspective. The loss of a branch in a local town can also impact the local economy and social fabric, with many elderly people relying on this type of face-to-face interaction. So, what’s next for banking? Is there an alternative that satisfies all parties? 

The future of consumer finance

To maintain positive customer sentiment, banks need to try and mitigate the negative impact of branch closures. They should consider their balance sheet, carry out cost-benefit analysis, and look at shared infrastructure options to minimise cost while maximising customer services. 

Some banks may decide to double back down on a physical presence, with high street banks pledging to fund 225 more Hubs across Britain by the end of 2024. But if a bank wants to properly invest in a Hub rollout and ensure it receives as much interaction as possible, how can it go beyond banking? Can it offer social spaces, training opportunities, and community engagement, for instance? There also needs to be careful thinking around Hub locations, with data exercises carried out on local footfall, economics, and the times people like to visit.

As similar dilemmas loom at every level of banking, the next decade may see a strange transition period of branches and Hubs appearing and disappearing across urban and rural areas alike. Community outreach and ensuring strong customer experience both physically and digitally will be key to shaping this future banking landscape, and winning consumers’ trust.  

Is cash also on the line? 

As banking becomes increasingly digital, so too is cash, with around half of all UK payments now made using debit cards. This has led to predictions such as the UK becoming a cashless society by 2043, alongside fears that this move could leave the elderly, vulnerable, homeless, and even tourists behind. 

From my perspective, a fully cashless society is unlikely to ever happen for a myriad of reasons. Firstly, there’s an entrenched desire and interest from too many parties to keep the privacy and security of cash, from the criminal underworld to banks who make money from cash loans and moving cash around.

Financial and cybersecurity risks also increase exponentially if the country is dependent on digital money. Consumers in particular want privacy over how they spend their money, and once this moves completely online, the threat of tracking and misuse by bad actors grows. Plus, complex new decentralised infrastructure would have to be built for a cashless country.

Overspending is also a risk—contactless cards can sometimes prove overly convenient, risking impulsive spending and higher levels of debt. It’s no surprise that during the cost-of-living crisis, cash use has risen slightly for the first time in a decade as households look to budget more stringently. 

Instead, we can expect peaks and troughs in terms of how people use cash and banks. For instance, if a well-known organisation suffers a serious cyberattack, people may turn to cash for a while for reassurance that their money will not be impacted by a similar outage. Ultimately, it’s likely that, while brick-and-mortar banks and physical cash are dwindling in use, they will have an important place in our society for years to come.