Author Mark Richards
The world’s first ‘hole in the wall’ – or more correctly Automatic Teller Machine – was installed in the Enfield branch of Barclays Bank in June 1967 – so the hole in the wall turned 50 this year. But with an American company now claiming that an interactive ATM can replace 80% of the functions of a bank branch, is the demise of the traditional high street branch inevitable? And what impact will that have on our town centres?
Banking? It is not as complicated as a board game
It is generally believed that the oldest board game that has been continuously played is Go, dating back to China more than 2,500 years ago. The game is played on a 19 x19 grid and it is far more complex than chess: the number of possible moves is put at 2 x 10170 – or, more simply, there are more potential moves in one game than there are atoms in the universe.
So quite a lot.
Anyway, last month Google-owned DeepMind introduced AlphaGo Zero, their latest evolution of a computer programme which defeated the Go World Champion earlier this year. You remember those possible moves? More than there were atoms in the universe? The programme mastered them all in less than 72 hours – with no human help.
The simple fact is that machines are going to surpass human intellect in any given intellectual task: right now, the AI community believes that 2060 is a reasonable estimate for its arrival – but not so long ago driverless cars were not going to be on our roads until 2040…
I do not know how many possible ‘moves’ there are in deciding whether to lend you or me £200,000 to buy a new house or to lend a business £500,000 to build a new factory. I do know that it is significantly less than the number of atoms in the universe. I am acutely aware that sooner rather than later I’m going to need to offer two of my children some careers advice: bank manager may not be top of the list…
The banks sit their exams
Our high street banks have just had their annual MoT test when the Bank of England checks on their ‘resilience’ – can they cope with a financial crash in other words. The good news is that they all passed the exam, but the Bank of England is concerned about ‘fintech’ – financial technology – which, it believes, poses a threat to the high street banks which they are not yet taking seriously.
The high street banks face ever-increasing competition from the so-called ‘challenger banks’ – new, nimble banks and specialist lenders that operate mainly online, do not have to maintain an expensive high street branch network and are also not burdened by the sins of the past, such as the PPI miss-selling scandal.
The ‘fintech’ firms – offering everything from quicker financial payments to loan decisions made by artificial intelligence – have operating costs way below those of the high street banks. They also appear to have hit on the frankly ludicrous marketing tactic of giving customers what they want, not what the bank think they should have. Neither do they see the need to waste millions of pounds on ads featuring Scooby Doo…
PayPal is much quicker
With the greatest possible respect, my high street bank seems to exist solely for the convenience of local traders paying in large wads of cash. Don’t you just love waiting in the queue while someone pays in the weekend’s takings? And then they hand over a page torn out of their notebook with details of how much change they need…
In the time I spend queuing someone in Oklahoma can send me a payment by PayPal. I can deal with the transaction on my mobile phone. As we move inexorably towards a cashless society – however much the local butcher might protest – will there really be any need for high street banks?
Within five minutes’ walk from my office, there is a Barclays, HSBC, Lloyds, RBS and NatWest. As in so many towns, the banks are clustered together: take those branches away – in a town where a pound shop has recently closed down – and the town centre suffers a hammer blow. But it seems inevitable that the banks will follow the same path as so many of our retail outlets…
Clicks beat bricks on Black Friday
It was perhaps the easiest result of the year to predict. With due respect to supporters of the Bees, it was Manchester City vs. Barnet. In the Battle of Black Friday clicks (online shopping) easily beat bricks (trailing around town in the cold and wet with a carrier bag).
According to online retail analysts, IMRG people in the UK spent £1.4bn online on Black Friday (November 24th) – up 11.7% on the previous year. Meanwhile, if you thought your town looked quiet on Black Friday, that is because it was. Analysis firm Springboard said that footfall in high streets, shopping centres and retail parks was down 3.6% from the previous year. When chains agonise about a 0.5% fall in ‘like for like’ sales, that is a very big fall.
High Street Banks: The future looks bleak…
Lloyds has just announced the closure of 49 branches: not surprisingly they have blamed a ‘fall in customer visits’ as people turn to digital and mobile banking. Banking union unite have criticised the move – which will lead to the loss of 96 jobs – saying that Lloyds is “ignoring its corporate social responsibilities.” That is like the Candlemakers Union criticising people who switched to electric lights: banks are not going to keep unprofitable branches open and the rise and rise of ‘fintech’ is only going to hasten the number of closures.
‘Disruption’ is the modern term for an industry being turned on its head. Well, Henry Ford disrupted the horse and buggy industry, Uber disrupted the taxi business and fintech is going to permanently and irrevocably change retail banking.
Ten years from now it seems impossible to imagine the same number of banks on the nation’s high streets. As we move towards a cashless, online society their closure looks inevitable: what it will do to town centres is anybody’s guess. Even now, so many high streets are only viable thanks to one major retail outlet like Marks and Spencer. So as the banks face a precarious future, the M&S Christmas results are going to prove vital – not just for the company itself, but for the long-term future of the nation’s high street.