The rise of faceless banking: Are we becoming a nation of online savers?

Amidst the wave of branch closures over recent years, Britons are feeling increasingly confident of managing their finances online.

A rising number of savers and current account customers are now prepared to shun high street branches in favour of the comfort and convenience of managing their money online, according to two separate studies by Investec and comparison site NerdWallet.

Three in five Britons would now consider using a bank with no physical branches, with as many as two in five prepared to have a digital-only bank as their one and only provider, the research claims. 

Two in five savers claim they now spend more time managing their money than they did before the pandemic, in the main thanks to online access.

More than a third of people claim they selected their bank based on online features, with almost a quarter being influenced in their decision by the convenience offered through the bank’s app.

Banks and building societies have closed or scheduled the closure of 4,299 branches since January 2015, according to the consumer group Which? at a rate of around 50 each month.

With more than 300 UK branch closures already confirmed by Santander, Lloyds, Halifax, HSBC, NatWest, and Barclays this year, online banking is becoming increasingly necessary for many Britons due to the dwindling number of physical options.

The six largest UK banks and the country’s biggest building society Nationwide have 5,069 branches left between them, of which 213 are the last in town.

All the banks are blaming branch closures on the rise of online banking, which they say has led to a drop in footfall forcing them to prioritise investment in digital services.

HSBC boss, Ian Stuart, said the number of customers using its branches had fallen by almost 40 per cent in the past five years.

Almost a quarter of Britons say their choice of bank is influenced by the convenience offered through the bank's mobile app.

Almost a quarter of Britons say their choice of bank is influenced by the convenience offered through the bank’s mobile app.

Despite the shift, there are still a large numbers of Britons who value the continued presence of branches in their local area and are concerned about the closures.

Over one in five people said they would want to use both a digital and conventional bank with branches, according to NerdWallet’s research, with more than one in four people having selected their bank based on their proximity to a local branch.

Of those who said they would want both a digital and conventional bank, almost half said they also liked the security of a traditional bank, whilst 43 per cent said they were still not completely confident in new online-only options.

Banks and building societies have closed or scheduled the closure of 4,299 branches since January 2015.

Banks and building societies have closed or scheduled the closure of 4,299 branches since January 2015.

It was also revealed that two in five of Britons surveyed have concerns about older relatives not having access to banking services in the future, and over half were concerned about the death of the high street.

Denise Ko Genovese, from NerdWallet, said: ‘The shift to digital banking is very apparent and this trend is undeniably a contributing factor in bank branch closures.

‘There is also an expectation as everything becomes more digital, for banks and other service providers to evolve to meet the modern needs of the public as well – 24 hour and remote access, immediate transactions, and ongoing budget tracking are just a few benefits online banking provides.

‘But we are in a time of transition and there is clearly still a role for physical branches on the banking landscape.’

Are people switching to online current account providers?

The research appears to ring true when considering the Current Account Switching Service figures.

Some of the familiar high street banks have continued to be shunned in favour of online app-based challenger banks such as Starling and Monzo.

For example, since the start of 2018, TSB and Barclays have recorded net customer losses of 116,847 and 90,290 respectively in terms of those using the seven day switching service.

Monzo and Starling Bank, neither of which have physical branches, have recorded net customer gains of 131,290 and 110,505 respectively during that same period.

The most cited reason for favouring a new account continues to be ‘non-financial’ according to the Current Account Switch Service.

Online and mobile banking offerings and better customer service were reported as the most common reasons why customers would switch bank accounts, rather than proximity to a local branch for example.

Are more people managing their savings online?

A separate study by Investec, also found that Britons are spending more time managing their savings than they did at the start of the pandemic, with a greater propensity for doing so online.

During the pandemic, more than one in ten savers started to manage their money online for the first time during the crisis, with many of those saying they downloaded an app for the first time.

The online switch can in part be explained by the fact that 8 per cent of savers say they stopped using branch-based accounts during the pandemic.

Seven out of ten people with savings accounts say they now only use digital platforms to manage them, while just one in 20 people say they only use call centres and branches to manage their savings.

Samantha Booysen, head of digital savings at Investec, said: ‘It’s encouraging to see so many people with savings accounts spending more time managing them.

‘Digital services and platforms can make it much easier for many people to do this, with greater access to their money.

‘This will also help savers to spot any big changes to their accounts, allow them to easily switch if they’re not happy with the interest rate and overall service they receive.’

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