In the past 25 years, the UK has seen the closure of nearly 10,000 bank branches – over half of all branches – as more and more customers gravitate towards online banking in a tech-savvy world of contactless cards and virtual cheque payments. Having said that, there are still many customers, particularly the elderly, who prefer a face-to-face service and the chance to talk to people; to get financial advice, to access their money physically, and to have the security of seeing their bank transaction being processed.

Consequently when a bank closure occurs, especially if this is in a rural location, members of the community may struggle. So, it is important that the replacement Post Office service provides the same level of service and products as those offered by the departing bank.

According to the consumer group, Which?, there are about 60 bank branches closing every month. This means that 2,868 branches will have closed between 2015 and the end of 2018, with the number accelerating this year.  Banks are eager to substitute the face-to-face relationship with a range of digital on-the-go capabilities. (Business Insider previously reporting that from 2012 to 2017 consumer usage of banking apps had massively increased to 356%.)

When the banks have come under fire for the closures, they cite low customer numbers and commercial loss as major contributing factors to the closures, choosing instead to offer day-to-day banking services through 11,500 Post Office branches. RBS has been heavily criticised for its closure programme in Scotland but boss, Ross McEwan, has remarked that the Post Office network is the “best solution to community banking.”

But post offices premises can often be unsuitably located in shops and newsagents. Unite recognised this recently proclaiming;”Post offices are closing at an alarming rate or being relocated in the back of a shop with a much reduced counter service which is not equipped to deal with the volumes of business cash or the community’s banking needs”.

A lack of a visible presence on the high street also means many customers, especially SME’s, may be unaware that the post office provides a banking service. As a consequence of this an Action Plan was launched in 2018 by the finance industry and the Post Office to raise awareness of banking services available at Post Office branches amongst local communities with lower bank branch coverage.  The five point plan had been devised following a request from John Glen, Economic Secretary to raise the limited awareness of the banking services available at Post Offices.

The Minister had previously attended a Backbench Business Committee debate to hear MP’s describe the effect of community bank closures on their constituencies.  During the debate MP’s noted that the Post Office provides a valuable service but, “its ongoing restructuring process has seen too many branches close in recent years and we do not know what the future holds”.

The Post Office is also limited by its maximum cash deposit limit of £2,000 which could prove restrictive for local business. Open plan retail premises could inhibit customers from taking advise in branch on mortgages and loans due to a lack of privacy.  Nick Herbert MP referred to the importance of identifying suitable premises so the post office can operate effectively as a community banking hub. Mr Herbert said:

“As suitable premises can often not be found, suitable post office sub-postmasters cannot be found in various villages and small market towns in my constituency. This means that there is sometimes a suspension of post office services for a period of months, even though the Post Office’s policy is that there will be a post office outlet in these communities. That cannot happen if the post offices become increasingly important owing to the fact that they are providing banking facilities as well as all the other important facilities that they provide for the local community.”

It is very important that we continue to embrace technology and the improvements brought to use by fintech; but we must not forget that many customers today – especially those on the fringes of the mainstream – still rely very much on personal contact, face-to-face relationships and the comfort of physically seeing their financial transactions take place.

To be fully effective, the Post Office network model needs to be resilient and well-designed. Most importantly, the regulator must ensure the network can provide a service similar to the old bank branches. And finally, we must not forget that access to credit for all creditworthy customers will no doubt need to be both future-proof and traditional to ensure that access to credit is available for all in the way that best suits the needs of a variety of different consumer groups.

Greg Stevens, CEO CCTA