Guest blog: Lloyds’ ‘micro branches’ will only deepen the damage caused by branch closures

April 7, 2017

By Simon Chandler, News Editor of Choose.co.uk, a consumer information site covering personal finance and technology services.

Lloyds Banks have seen the future of personal banking, and that future is “micro.” At least, this appears to be the gist of their recent announcement that they’ll be downsizing “hundreds” of their remaining banks into “micro branches,” establishments no bigger than 1000 square feet that are staffed by no more than a couple of attendants.

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CC BY 2.0, Money Bright, Flickr

Such micro branches might initially come across as an intriguing answer to the devastating wave of branch closures still gripping the UK, yet the sad fact is they aren’t meant as a solution to the disappearance of community banking, which according to Move Your Money’s “Abandoned Communities” report has seen the UK lose 53% of its branches since 1989. Instead, they’re meant as a complement to it and as an extension of its logic.

Rather than providing a means of saving branches previously earmarked for the chop by helping Lloyds to save money in alternative ways, they will instead see the Big Six bank rationalise even those branches they’ve vowed to preserve. That this is so comes out in how, in addition to miniaturising hundreds of branches, Lloyds are in the process of completely closing more than 400 others, closures which are part of a three-year “restructuring” programme first announced in 2014.

Once opened, these mini branches “will have only a few staff equipped with mobile tablets to help customers make basic transactions such as payments.” As such, they reveal Lloyds’ apparent aim of injecting the logic of the online banking revolution into many of their last remaining bricks-and-mortar locations. Rather than keeping these branches staffed with the kind of financial advisors who can offer customers much-needed guidance on important financial decisions, they simply aim to cut costs for the company by turning the embattled bank branch into a kind of walk-in website, where people who aren’t computer-literate will be taught how to use an ATM by assistants.

In this way, it seems, Lloyds’ won’t simply be training their customers to use electronic and automated forms of banking, but they’ll also be clearing the ground for a future where more and more of their customers are forced to make do with mobile and online banking. Of course, they’ve been preparing for such a future for some time now, not least because of how the services offered by their surviving branches have been streamlined and centralised over recent years.

For example, there’s long been a debate over the dwindling role of the bank manager and whether branch staff are actually able to give personalised advice anymore, with banking procedures being conducted on much more of a systematised rather than case-by-case basis. Such changes all stem from the liberalised business models [PDF] the Big Six and other banks have been pursuing since at least the ‘80s and ‘90s, which has led them to rationalise and automate as much of their operations as possible as they bid to compete with each other for profit, as concluded by MoveYourMoney’s “Abandoned Communities” report. And by way of the affordances of modern, wifi-enabled technology, it has now led one of them to the planned opening of micro branches, which will further deepen the problems they’ve created.

Indeed, rather than addressing the main issues created by branch closures, micro branches and their inability to provide a tailored financial service will only exacerbate them. As with the increasing use of post offices as makeshift community banking centres, they may enable the customer to continuing transferring money, yet they also continue to deprive her of the much-needed banking advice and guidance she needs when seeking to make important decisions. For example, a 2016 study from the Social Market Foundation found that 63% of British people prefer speaking to someone face-to-face when making important financial decisions, something which indicates how negatively they’ll continue to be affected in areas where micro branches emerge to ‘fill’ the void.

Not only will people continue to be hindered from making important financial decisions, but the “Abandoned Communities” study highlights how micro branches will continue to deprive them of the ability to secure all-important finance for small and independent businesses. In this research from last year, it was found that branch closures have a severely negative effect on SME lending, going so far as to reduce it’s growth by 63% on average in areas experiencing a single branch closure. More astonishingly still, this grows to 104% in areas that see their final branch disappear. Above all else, this starkly underlines the need for more than just the ability to make simple transactions, and it starkly underlines how micro branches – which will offer customers help only with using various banking machines – will not only do nothing to address the decline of small business financing, but will make things worse.

In view of all this, it becomes clear that, far from tackling such serious problems, plans such as Lloyds’ will only deepen them. Not only that, but they seek to make the continued disappearance of traditional community banking more acceptable, while continuing to restructure the banking industry in such a way as to allow it to recoup some its massive, self-caused losses from the financial crisis (e.g. RBS cut the most branches in the year between April 2015 and 2016, which is interesting insofar as they made their ninth consecutive annual loss in February). As such, while Lloyds’ idea might initially seem like a good one, it will only accelerate a trend that has seen banks increasingly favour the wealthy while neglecting those who aren’t so affluent.

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