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Insider Intelligence forecasts that branch penetration in the UK will dip from 65.3% in 2019 to between 60% and 62% in 2024.
Consumers have been relying less on branches for some time now, but pandemic effects will amplify existing network and behavioral changes to accelerate that trend, with the biggest drop in penetration — defined as the percent of UK bank account holders ages 18+ who visit a branch and see a representative at least once per year — occurring in 2020. Penetration will tick back up in 2021 as pandemic restrictions are lifted and then steadily decline thereafter.
Here are the key drivers that will inform declining branch penetration through 2024:
- Coronavirus-related restrictions are temporarily limiting branch access — but could drive a long-term behavioral shift. Since social distancing measures were implemented across the UK, banks including HSBC and Barclays temporarily closed or modified hours as a safety precaution. Digital channels have subsequently become the primary banking access point: Avoiding branches during lockdown is UK consumers' most-cited reason for using digital banking more frequently during this period, per a Virgin Money UK study. The longer branch access remains restricted, the more consumers will turn to digital channels to use these platforms for the first time or discover new features. And many will form habits around doing all banking remotely.
- Banks are shuttering branches on a large scale to rein in operating costs. One-third of UK bank branches closed in the last five years, led by RBS, which cut its network by 56% between 2015 and 2019. These closures are driven by the need to slash the massive costs associated with operating branches, freeing up funds to invest in digital tools. These closures are going to continue — TSB is closing 80 branches this year, Lloyds is closing 56, and HSBC is closing 27 — meaning consumers may have fewer nearby branches and opt for digital instead of traveling to a physical location.
- Consumers' rising preferences for digital channels is tempering demand for branches. Millennials and Gen Zers are set to become UK banks' largest addressable market, and the tendency of these digitally native consumers to use digital platforms will result in fewer branch visits, especially as an increasing number of services become available remotely. And as digital account opening processes become more autonomous, they're eliminating the need for consumers to visit branches altogether.
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