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Thursday, May 20, 1999 Published at 14:56 GMT 15:56 UK


Business: Your Money

Banking branches out

Technology means fewer transactions are done over the counter

The announcement by Barclays that it is to shed 6,000 jobs is an indication of the huge changes in British banking in recent years.

The traditional lunchtime queues to withdraw money have become shorter with the advent of postal, telephone and now Internet accounts.

And the fact that banks are keen to switch the emphasis from branch-based services was exemplified by Abbey National's recent decision to charge customers £5 for certain over-the-counter transactions.


Adrian Graves, National Association of Bank Customers: 'Part of a trend'
While Barclays says no branches will close as a result of this latest raft of redundancies, new technology has meant that banks need fewer staff to deal with customers.

Banking, like so many sectors, is now a shining example of the modern consumer mantra - choice. Many building societies have converted to banks, you can get a loan, pension and insurance in one stop, and they are all falling over themselves for your custom.


[ image: Most cash withdrawals are now handled by ATMs]
Most cash withdrawals are now handled by ATMs
The revolution started 30 years ago with the humble automated telling machine (ATM), which provided an alternative for those too busy to wait inside their branch. Now an astonishing £98bn is withdrawn from hole-in-the-wall machines every year.

Then a decade ago, First Direct introduced telephone banking. It now has nearly one million customers, operators are available round the clock, and it is estimated that one-third of the population will do some banking over the phone this year.

In the drive to win customers and cut costs, postal savings accounts proved popular, as they were able to offer higher rates of interest.

And now there is the Internet. Many banks are already offering online accounts, and Prudential's launch of its Egg savings account demonstrated the real potential of the medium.

Since it began in October, Egg has collected £5bn in savings from 500,000 customers. It now accepts Internet applications only, although existing customers can still make transactions by phone or post.

Supermarkets joined the fray

The blurring of traditional business lines has added to the explosion of the financial services sector. Supermarkets had long been allowing customers to withdraw money through "cashback" schemes, but now they go the whole hog.

Sainsbury and Tesco are among those who have set up fully-fledged banks, offering everything from savings and loans to pensions and credit cards. And Marks & Spencer Financial Services is one of the company's few bright spots, reporting profits up 24% at £111m.

All this change has brought choice and convenience for many people, but not all in the garden is rosy.

As shown by the news from Barclays, the restructuring of the banking sector has been painful - it is estimated that up to 200,000 jobs have been lost in recent years.

"The banks say all this is being driven by customer need, but this trend towards centralised processing is just having an impact on jobs, not necessarily on customer services," said Dai Davies of the banking union UNIFI.

High Street presence 'important'

And while many are undoubtedly happy to phone up or log on to do their business, others rely on their local branches.

"A presence on the High Street is very important to certain sections of society," said Derek French of the Campaign for Community Banking.


[ image: Barclays is one of the banks offering online services]
Barclays is one of the banks offering online services
"Small retail businesses and pubs which need change every day can't do that over the Internet. And a lot of older people don't like using cash machines and sometimes don't have access to a phone, let alone the Internet," he told BBC News Online.

During the 1990s, 3,850 bank branches have closed down. Research shows that has left 600 communities without a personal banking presence. It is feared that over the next five years, another 1,000 communities will be left in a similar position

"When one bank has closed a branch, the same economic factors which brought about that decision will inevitably lead others to pull out of that area. There's no huge transfer of business to the banks that remain," explained Mr French.

The banking industry is funding an independent study on the future of banking, which is due to be published later this year. Mr French is contributing to the review, and will be outlining his group's proposal for community banks.

These would be staffed, low-cost outlets which provide a neutral delivery channel on behalf of several competing companies.

Branches 'a social obligation'

Meanwhile, Mr French will keep fighting for banks to maintain their High Street presence. "It's partly a social obligation, but some of these customers are actually bringing in a lot of money for them," he said.

His concerns are echoed by the National Association of Bank Customers. "We are losing the friendly face of the local bank and customers are becoming faceless numbers on the end of the telephone," said spokesman Stuart Cliffe.

He can understand why banks want to move in this direction, citing industry figures that it costs £20 to deal with a customer in a branch, £2 on the phone and just a few pence on the Internet.

"But if local businesses find it more difficult and expensive to bank in their town, they might leave and go elsewhere. The banks are still handing to customers what best suits the bank, and not what customers want."

The sector is likely to continue developing in the immediate future. The British Bankers' Association says its members are simply responding to changes in customer habits.

In the Berkshire village of Theale, staff at Lloyds TSB have been replaced by a row of five cash machines, in an experiment to see if so-called lobby banking is a viable option. There is also talk of mobile branches and franchises, where shops offer banking services.

Gone are the days when the only decision was which of the big banks you wanted to handle your finances. Now you are more likely to select the medium first, and then the company - in both cases, you are spoiled for choice.





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