Post Office leads drive to preserve UK access to cash with banking hubs

The Post Office is spearheading a push to address the demise of high street bank branches across the UK by trialling “banking hubs” to help preserve access to cash for millions of people and small businesses.

The state-owned group will begin trials of shared branches next month, involving the main high street banks in the small English towns of Ampthill in Bedfordshire and Rochford in Essex, and Cambuslang near Glasgow in Scotland.

British banks closed almost half their branches between 2000 and 2019, and the trend is expected to accelerate as the coronavirus pandemic encourages customers to use digital payments and puts more pressure on the industry to cut costs.

Branch closures have also led to a reduction in ATM numbers, a decline that was exacerbated by a dispute over fees that encouraged independent ATM operators to replace free cashpoints with pay-to-use machines.

The three Post Office hubs set up in new high street premises are part of a wider scheme — the Community Access to Cash Pilots (CACP) — that includes six other projects with local communities trialling different measures. The initiative is funded by the banks in a bid to address concerns that branch closures and declining cash usage could leave millions of people stranded outside the mainstream financial system.

UK has one of the lowest rates of bank branches per head in Europe; charts showing number of UK bank branches and bank branches per million inhabitants

The pilots are being closely watched by the Treasury and Financial Conduct Authority, which are both expected to lay out their approaches to ensuring cash access next year.

Martin Kearsley, Post Office banking director, said the joint branches initiative would help make banking as important to the company as its traditional mail and parcel business. He added that it had “a social and moral responsibility to focus on cash and banking as one of our main strategic pillars”.

The group has gradually taken a greater role in the UK’s financial system in recent years, offering services such as cash withdrawal and deposits. In January, however, its efforts will enter a new phase with the opening of new spaces dedicated to banking.

The Post Office is hoping the new “banking hubs” will eventually spread across the country, but it will have to convince sceptical bankers to support a wider rollout after contentious contract negotiations last year soured relations.

Mr Kearsley said the hubs had been designed to avoid the problems that beset earlier efforts to build shared branches, such as a lack of staff, unclear branding and limited services. They will provide counter services to customers of all major banks, while customers of the largest high street lenders will be able to book meetings with bankers to discuss more complex issues.

The Post Office in Hay-on-Wye will be fitted with an automatic deposit machine for use by small businesses as part of the access to cash pilot scheme © Greg Balfour Evans/Alamy

The loss of bank branches in smaller towns can have a much wider impact than just access to the services they offer. In the Welsh market town of Hay-on-Wye, best-known for its annual book festival, small businesses suffered when its last bank branch closed in 2018.

“When the banks closed, people who would have come in once a week from the surrounding areas started going to the nearest town where there are branches, like Brecon or Hereford, so the other businesses in town lost custom,” explained local bookshop owner Josh Boyd Green. “If people are only coming in once a week they want to be able to do everything, and the Post Office can’t answer some things.”

Hay is one of the other six UK towns chosen to pilot the other CACP measures, which include making it easier for shops and pubs to offer cashback, improving digital education to encourage online banking, and putting an automatic deposit machine for small businesses in the Post Office.

Mr Boyd Green, who led Hay’s application to the scheme, said he was optimistic that the measures would address the most urgent issues for locals and visitors who need to use cash. But he said he would like to eventually see a broader rollout of the Post Office’s multi-bank branch scheme.

Column chart of ATM transaction volumes (m) showing The coronavirus pandemic has accelerated the decline in cash usage in the UK

“We’re not going to persuade the banks to come and reopen branches, but if we can prove that there are services that people still want, finding a way to put that back in communities would be a real win.”

Natalie Ceeney, the chair of CACP, said she saw the Post Office’s hubs as an “important part of the long-term answer” as banks close more branches, but said the company may have to agree to tighter regulatory oversight to convince lenders to trust it.

The government began considering new regulation last year after a contractual dispute almost led to the collapse of the existing framework through which the Post Office provides services for banks.

Lenders, particularly Barclays, were angered by rising costs and raised concerns about the quality of the Post Office’s operations and the risks of becoming overly reliant on a single supplier.

“Putting all your eggs in one basket cannot be sound business policy,” said Derek French, a longtime campaigner for shared bank branches. “I do think Post Offices have a very useful role to play for the future, particularly in smaller, rural locations . . . but can the banks afford to just leave it to the Post Office to scale up and still charge them an acceptable fee?”

Mr Kearsley acknowledged the relationship with banks went through “a very difficult phase”, but said he was confident lenders would come round if it could prove the viability of its hubs.

“One or two might be resistant and suspicious, but there’s a different community within those banks who are incredibly positive about working together,” he said. “If these things are successful, this will enable banks to move even faster to reshape more of their networks. That’s not necessarily a bad thing, so long as the service left behind can meet what their customers need.”


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