The announcement last week of sweeping branch closures by Virgin Money UK, owner of the rebranded Clydesdale Bank business, was as demoralising as it was predictable.
Virgin Money UK calls its branches “stores” these days. Most of us would probably still know them as branches, including loyal customers in the likes of Portree, Wick, Oban and Banchory who have been told their local points of contact with their bank will be closing.
As it announced the latest closure programme to the London Stock Exchange on Thursday last week, Virgin Money UK declared: “The group has been evaluating the opportunities to accelerate its digital strategy enabling greater efficiency and driving up levels of digitisation across the bank to further develop a strong, scalable platform for future growth.”
This elaborate corporate speak appears to make no bones about cost-cutting being a key aspect of the move.
Furthermore, Virgin Money UK declared in a separate press release that the change would result in “a reduction of around 112 full-time equivalent roles across the group”. So cost-cutting.
The bank also raised the spectre of redundancies, declaring: “It is Virgin Money’s intention to find alternative roles for colleagues wherever possible, either within other stores locally or elsewhere in the group. However, some colleagues will be at risk of redundancy.”
Amid the many disappointments in Virgin Money UK’s statements, it was also dispiriting to see it cite reduced footfall during the pandemic as a factor in the branch closures.
There had been a moment early in the coronavirus pandemic when it looked as if the crisis might slow banks’ branch closures for a while. Now it looks, sadly, as if the effect is going to be quite the opposite.
Yes, there has been a decline in branch footfall over recent years. However, the pandemic is no period over which to judge anything.
It has, for sure, seemed that the banking sector in general has been ramping up its efforts to persuade customers to use online services amid the pandemic. However, that does not mean that this is now the preferred channel of many customers who will, for obvious reasons, have been limiting their face-to-face contact with people and their outings during the pandemic.
Virgin Money UK declared: “During Covid-19 the group has seen a shift in sales volumes and communications to digital and mobile channels, with lower branch footfall.”
This is hardly surprising. But it is hardly the basis on which to make permanent decisions around branches.
Sadly, much of the bank’s latest round of closures will hit customers in places where there is not another Virgin Money UK branch (or “store”) within any kind of reasonable travelling distance.
In relation to the Portree closure, the “new host address” for customers is the Virgin Money UK branch at Fort William, 80 miles away if a ferry journey from Armadale to Mallaig is included, the bank notes. Alternatively, driving via Kyle of Lochalsh, the distance is 108 miles, Virgin Money UK calculates. In the case of the Oban closure, the “new host address” is Poltalloch Street in Lochgilphead, 37 miles away. For round trips, as any banker could hopefully tell you, the one-way distance should be doubled.
When these decisions are being signed off by Virgin Money UK top brass in London, is there a proper awareness of geography? Maybe there is and these matters are just viewed as something which should not get in the way of the bank’s opportunities to “accelerate its digital strategy”.
Virgin Money UK’s own announcement made it plain that, for many of the branches being closed, there is not another one nearby where the customers will be able to go instead.
Rather, as with some other banks, Virgin Money UK cites the proximity of Post Office branches. Remember the days when the banks used to, in some ways, compete with the Post Office?
Virgin Money UK declared 28 of the 30 “customer stores” closing in early 2022 “are located less than a third of a mile away from the nearest Post Office”.
It added: “Of the other two stores, one is 0.7 miles away from a Post Office and the other is 2.7 miles from the nearest alternative Virgin Money store.”
So it seems it is mainly Post Office outlets, rather than other Virgin Money UK branches, which are close to the “stores” being shut.
The latest round of closures unveiled by the bank represents close to one-fifth of the network which remains after previous cuts, and includes 12 branches in Scotland.
Setting out the criteria for its closures, the bank said: “The decision to close a store is based on a number of factors, including location, usage, proximity to alternative stores and lease arrangements. Each store was assessed on an individual basis, with careful consideration of the impact on the local area, as well as the needs of vulnerable customers and the accessibility of alternative services such as free-to-use ATMs (automated teller machines) and Post Offices.”
Royal Bank of Scotland (now known as NatWest Group at holding company level) and Barclays have also highlighted the proximity of branches they have closed to Post Office locations.
However, while some transactions can be handled by the Post Office network, various more complex, and often very important matters which can be dealt with in bank branches cannot. This is a crucial point.
Consumer champion Which? calculates that banks and building societies have closed, or scheduled the closure of, 4,299 branches since January 2015.
It declares: “Over the past few years, bank and building society branches have been disappearing from our high streets at a frightening pace.”
This seems like an entirely reasonable characterisation of the situation.
Whatever happened to customer service in the UK banking sector? Customers should be allowed to transact with banks through the channels they choose, whether that is in person, by phone, or online.
Whatever happened to “the customer is always right”?
Virgin Money UK has a “group customer experience director”, a post held by Fergus Murphy.
He had this to say about the branch closures: “As our customers change the way they want to bank with us and conduct fewer transactions in-store, we must continue to evolve the role of our stores into places where we showcase our products and bring our digital services to life.”
This will be cold comfort to customers in the likes of Portree, Oban, Banchory, Stenhousemuir, Wick and Galashiels who are seeing their branches (or “stores”) closed. Many will presumably be far more interested in transacting with a human in their branch than in Virgin Money UK’s ability to “showcase” its products. And it is not as if the bank is selling cars, or top-of-the-range mobile phones or laptops.
Virgin Money UK said it would “work with customers to support a smooth transition, particularly where vulnerable customers are concerned”.
It added: “A range of support services will be available prior to store closures, including digital workshops to help customers become more comfortable with digital banking.”
However, what about the customers who want a branch and not a “digital workshop”? Is their “customer experience” important to Virgin Money UK?
Similar questions of course apply to the other big banks which have also been continuing to close branches in huge numbers.
Amid the explosion of financial technology, it often seems that bank top brass focused on developing functionality and apps to stay ahead of the game online have lost sight of the fact that many of their customers either prefer or need access to a branch.
Sadly, the slew of bank branch closures looks set to continue.
We seem to be well past the tipping point.
Long gone are the days when intervention by politicians made a significant difference in the context of branch closures.
And customers generally have little option in terms of voting with their feet because the vast bulk of the banking sector has been on a path of wholesale branch closures.
Banks are therefore able to save money by continuing to shut branches as they please, without consequence in terms of an impact on the brand or any significant loss of customers, who basically have to take the reduction in service on the chin because they have no other choice.
It is a sorry state of affairs indeed.