The recent announcement that Lloyds Banking Group is to shut another 136 branches by March next year is the continuation of a trend seen across the high-street banking establishment.
The landscape of high-street banks has undergone significant transformation in recent years, marked by a notable trend towards downsizing physical retail banking locations. This shift is attributed to various factors including the rise in digital banking solutions, changes in customer behaviour, and strategic cost-cutting measures. Despite banking industry figures showing that only 12% of payments are made with cash (assuming they can accurately track that is another matter), 1.5 million people in the UK use mainly notes and coins in their daily lives.
Barclays, NatWest, and Lloyds have collectively announced the closures of 388 branches, and rising; and the shift is not confined to the UK alone. In the United States, banks have also been restructuring their physical footprint, with significant numbers of branch closures reported. One report suggests 1,646 branches were closed each year between 2018 and 2022.
These closures are a reflection of an inflection point for the banking industry’s pivot towards digital services and the reassessment of the necessity for physical branches in a digital age. Not to pass comment on whether these transitions are right for all the customer segments that wish to access or can only access banking resources in different ways, I want to look at this pivotal change through the lens of brand differentiation and consumer experience.
Having worked in FS marketing for decades (it’s depressing to talk in decades) I’ve worked with brands on both sides of the previous and now crumbling divide of physical vs digital only. Having worked as a strategist for a number of the legacy mainstays of UK banking, their physical presence, regardless of continually needing to raise the floor digitally, was literally the bedrock of the brand, whether overtly expressed or not.
From having what are effectively marketing billboards on high streets with high passing traffic, to the personal customer experience the brand could offer to those who stepped inside, it was a clear differentiator to the ‘upstarts’ that started emerging in the 2010s. Starling Bank launched in 2014, followed by Monzo and Revolut in 2015, each with the intention to smash the ‘archaic’ banking model and to grab a foothold without having to set up or takeover a competitive high-street presence, negating all the time, resource and risk in doing so. With propositions that were anti-establishment, modern and digital first none of that was necessary.
The divide between physical vs. digital-only was a fairly clear battlefield. The physical banks needed to up their digital presence – which they did – but always had the trust and presence from having an actual location to leverage in their brand marketing comms.
The ‘digital-onlys’ also represented a clear enemy as they promised faster, more intuitive banking in a better, more frictionless way. It was an era of open banking, it was about promoting saving pots, spend trackers and easy money management.
As the divide is effectively being removed between the old and the new, it will irreversibly change the marketing landscape of banking and wider financial brands forever. There will be more pressure to build and maintain critical attributes such as trust, but also with a constantly raised floor of consumer expectations in respect to products and features provided as standard in the palm of their hand.
How to differentiate in this new, more level playing field will make for an exciting if not daunting challenge to bank and FS brand marketers everywhere.
Toby Strangewood, Founder of Wake the Bear
