The closure of 56 Lloyds Banking Group branches across the UK highlight the headlong pace that bricks and mortar outlets are being swept away by digital banking.

Britain’s biggest banking group, by accounts, said last week it would close 31 Lloyds Bank branches, 10 Halifax sites and 15 Bank of Scotland outlets by October.

This latest announcement is the latest sign of a rolling shockwave that has hollowed out Britain’s branch network for more than a decade, according to data gathered by LearnBonds.

More than one in three of all the banks across the country have closed over the last four years alone. That is over 3,300 branches, or 34 per cent of the national network, while by contrast America’s branch network has seen little of this radical change.

Challenger banks

Royal Bank of Scotland (RBS), which owns NatWest, is the worst offender in the UK, cutting 52 per cent, or 797 of its outlets in just two years, and shutting 74 per cent of its network over four years, according to data provided by consumer group Which?

Just behind the Edinburgh-based group was Co-op Bank which axed 69 per cent of its branches, and NatWest (owned by RBS) which cut its network by almost half.

By contrast, the group opening the most branches over the last two years was minnow challenger bank Metro, notching up 17 new branches to expand its network to 62.

A Lloyds Banking Group spokesperson echoed the sentiments that major banks say when they announce branch closures.

The spokesperson said: “We are committed to having the largest branch network in the UK and, in addition to our branches, all our customers can also use the Post Office to access their banking locally, alongside our mobile branches which visit many rural communities.”

‘Changing customer behaviour’

The group added that its cuts were in response to “changing customer behaviours and the reduced number of transactions being made in branches”.

The march of digital banks such as Monzo, Revolut and Starling combined with consumer’s increasing use of online services has led to a shift in the way Britons use their banks.

All of these app-only banks have attracted millions of customers each in just a few short years. Revolut, the largest of which claims it has amassed eight million customers across Europe since it was launched in London in 2015.

These cuts have been most severe in rural areas, fuelling concerns about the impact on the elderly and the vulnerable.

The North West, Scotland, the South East and the South West were the hardest hit regions across the UK.

‘Community role’

Central Devon saw an 81 per cent reduction, losing 13 branches, while Carmarthen East and Dinefwr lost 80 per cent of its network, with 12 branches closed.

“Bank branches play a crucial role within communities, serving consumers and businesses alike, said Which? money editor Jenny Ross. “The industry must ensure no-one is left behind by the digital transition and that when banks shut their doors they don’t shut their customers out of important banking services.”

The average bank branch meanwhile received 104 visits in 2017, a 26 per cent fall compared to five years ago, said banking lobby group UK Finance.

Also, 74 per cent of adults used online banking last year, while the number of contactless card payments jumped 97 per cent to 5.6 billion in 2017, compared to the year before.

By contrast, in the US, where among other elements, digital banking services are less advanced than Europe, branch decline has been shallow.

Costly upgrades

America’s largest retail banks – such as Wells Fargo (pictured), Capital One, Bank of America – closed 4 per cent of their outlets closing over the past year, according to Retail Banker International.

There were 80,375 FDIC-insured commercial bank branches in the US at the end of June 2019. Over the last decade US big banks have closed 7,681 outlets or 9 per cent of branches.

In the US, among retailers and banks, there has been a “reluctance to adopt new technology because it requires upgrades or replacements”, said consultant Capgemini’s World Payments Report 2019. A lack of leadership from US regulators such as the Securities and Exchange Commission has also stifled innovation in this area, the survey adds.

By contrast, the UK bank branch network has been declining steadily for almost 30 years, with the rise of telephone banking weakening branch networks before digital. The UK branch network stood at 20,583 in 1988, but this had slumped to 8,837 in 2012.

‘Remorseless decline’

“The public and government have worried over the seemingly remorseless decline in the number of bank branches in high streets and rural areas for at least 30 years,” said a 2018 House of Commons briefing paper on Bank branch closures.

“The forces driving closure programmes are varied, but financial innovation and trends in society towards falls in demand for the use of cheques as a payment means and increased use of electronic payment services have all played their part. The impact of the financial crisis and the new regulatory costs bearing down on profits have made banks look again at the viability of their branch networks.”