Changes in the Banking Landscape

On a chilly Friday morning in early December, Abington Street in Northampton is quite lively. Even after losing major retailers like Marks & Spencer, Moss Brothers, and H&M in recent years, locals are still drawn here, particularly for banking errands.

As customers move in and out of banks like HSBC, Barclays, Metrobank, and the National Building Society, it’s clear this scene is somewhat of an exception. Since 2015, over 6,000 bank branches have shut down in the UK as banks try to cut costs and push more customers toward online banking.

However, there might be some hope for those who prefer in-person services. Recently, banks have started to pause closures and even open new branches, suggesting a possible small revival of physical stores.

HSBC UK has committed to keeping its 327 branches open until at least 2027. Meanwhile, Barclays, known for aggressive closures, has also increased the hours at 87 of its roughly 200 branches.

Smaller, challenger banks are also going against the tide. Metrobank has opened three new locations in Gateshead, Chester, and Salford, and the Newcastle Building Society has launched a new branch in Newcastle city center, pouring millions into a Grade II listed property.

“It’s intriguing to see how commercial decisions are shifting,” said Nikhil Rati, the chief executive of the Financial Conduct Authority, during a recent meeting with MPs. “More larger banks are beginning to highlight their commitment to keeping branches open for a time, which is definitely a change.”

Nationwide has made a significant promise to keep all 696 of its branches operating until at least 2030. This news was reassuring for Jatish and Sudha Shah, a couple in their 70s, who had been anxious that their local Virgin Money branch might close following Nationwide’s acquisition of a rival bank for £2.9 billion in 2024.

Jatish, who has hearing difficulties, prefers visiting the Virgin branch—which is just a short walk from the Nationwide—to manage their ISA account. “I know there’s online banking, and I can handle it, but I’d rather do it in person,” he mentioned. If that branch were to close, they would consider switching banks, he added.

However, the trend of keeping branches open doesn’t necessarily signal a change in customer habits. Research by KPMG shows that digital banking has led to a decrease in branch visits, with one in five customers in the UK not visiting a bank branch in the last two years.

Banks are realizing the importance of maintaining some direct customer interactions—though, it seems, through a much smaller and cost-effective network. “There’s this balance where you want to push more customers to digital, but having physical locations still offers value,” noted John Cronin, head of research at Seapoint Insights.

Part of this shift is about accommodating older customers or those who aren’t as tech-savvy. It’s also about competing for small to medium-sized business clients who often need advice and assistance.

This trend has even started appealing to younger customers, who have long relied on online-only banks like Monzo and Starling. Surprisingly, more people aged 18 to 24 visited bank branches last year than those over 65, with the younger demographic making up 72% of branch visitors.

“It’s a myth that young customers only prefer digital banking,” explained Peter Rothwell, a partner at KPMG UK. “While they enjoy user-friendly apps, many still appreciate having a local branch, whether it’s for depositing cash or managing finances.”

At the same time, older customers remain some of the most dedicated and economically significant clients. They expect ease of access, competitive rates, and personalized services from traditional banks. “For banks to thrive, they need to excel in both areas—digital innovation and personal service that resonates across generations,” he added.

Back on Abington Street, most patrons entering Nationwide seem to be simply withdrawing cash from the ATM. However, there are others, like 73-year-old Diana Yates, who have larger financial matters to address.

Diana shared, “I do use online banking, but my age and living alone make me uneasy handling large sums by myself. I lack someone to reassure me. At the branch, they assist me in a way that feels much safer.”

Gary Greenwood, a banking analyst at Shore Capital, noted that many banks are focusing on becoming “hubs for advice” rather than processing daily transactions. This means offering guidance for investments and significant life events like securing a mortgage or managing power of attorney when someone can no longer handle their finances independently.

These banking hubs are a response to many local branch closures, but they still fall short in some aspects. Despite sharing locations, many hubs offer only basic transactions, lacking personal engagement. KPMG’s data shows that 72% of UK customers have never visited a banking hub.

Issues such as online fraud and digital outages are also making the idea of branches more attractive. While both service types often utilize the same systems, physical branches reassure customers by having staff readily available to address concerns.

Looking ahead, Greenwood predicts that branches will likely narrow their focus on specific support roles, especially as older generations pass away. “Daily transactions might be handled at self-service kiosks, allowing staff to concentrate on offering valuable advice and tackling complex issues,” he said.

Despite the surrounding panic about artificial intelligence, Cronin believes it can ultimately benefit branches by taking over many manual backend tasks and enhancing face-to-face interactions.

“That’s where efficiency can come in,” Cronin explained. “Ten years ago, branches were plentiful, but as it stands now, we could witness another wave of closures in the future. A pause, I think, not a complete stop.”