Bank branch closures: a communications conundrum

Bank branch closures remain a major issue for banks, with changing financial habits and the threat of new competitors set to exacerbate the problem in years ahead. So what should a bank consider before closing a branch, and how could it affect its reputation?

The author(s)

  • Tom Sweeney Ipsos Global Reputation Centre
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Bank branch closures remain a major issue for traditional British banks, with changing financial habits and the competitive threat of nimble new entrants – unburdened by the challenge of legacy infrastructure set to exacerbate the problem in the years ahead. Branch closures can generate negative headlines, with the scale of the reaction potentially outweighing the significance of the action. This leads to some important questions for banks on how and why closures affect their corporate reputation.

Data from Ipsos MORI’s Sustainable Business Monitor (SBM) shows that branch closures are the third most important factor for consumers when judging a bank’s reputation; cited by 28% of the UK public and behind only financial stability (57%) and personal data leaks/hacking (51%). Indeed, the number of bank branches fell by 35% from 2010 to 2018. 
Findings from the Financial Research Survey (FRS) also show that the branch continues to be a key channel of management for current account holders; with interactions remaining stable for the past several years at around 67.5 million. Branch usage is also not the preserve of the elderly as 28% of all branch users are aged 16-34.

Graph showing judging the reputation of a bank, which two or three of these factors do you think are most important

 

However,  there is a split in opinion on how important an issue branch closures are. Data from the Ipsos MORI SBM highlights that, while two in five (39%) agree that there are no circumstances in which a bank branch closure can be justified, half (50%) say that branch closures reflect the cost pressures facing banks. Young people especially are significantly more likely to agree that branch closures reflect the commercial realities of the sector. Indeed, it is telling that just a fifth (21%) of consumers would be willing to pay for banking services to keep their local branch open.

Graph showing opinion on branch closures

 

In addition, seven in ten consumers (71%) say that if their current bank was planning to close a local branch, they would be interested in hearing more about the reasons for the closure and alternative options that will be made available for managing their finances. Although the public’s stated preference for arms length communication methods (email 69%, letter 55%) creates a challenge in explaining the nuanced reasoning behind closures, the general interest in further information does highlight the importance of communications around this issue. Indeed, if consumers can be made to feel that they are in control of the process, and their finances, then the potential outcry may be mitigated.

Graph showing how customers want their bank to communicate closures

 

When considering the closure of a branch, consumers are not the only stakeholder group that need to be considered, with key influencers such as MPs and journalists also playing an important role. Ipsos MORI’s regular tracking studies amongst these audiences, inform us that there are three main factors that will influence the scale of the reputation challenge associated with any closure.

  • The first is the customer base of a branch. Certain sections of the population rely more on having access to a branch than others, this may be because they have a greater reliance on cash transactions, or because they have specific circumstances that mean they need or want face to face interaction.
  • The second is community. The way people think about their community, and the position that the branch has in it, will affect how they feel about it closing. Communities that have a strong sense of self and a stronger civic culture will likely be more hostile to closures.
  • The third is communication. This not only applies to the way the bank engages with its customers, but also other key local stakeholders such as MPs and community leaders. Through dialogue with such groups, there is more opportunity to achieve a shared understanding and an effective path forward.

Although the years ahead will undoubtedly present significant challenges for banks needing to close branches, research shows that there is a clear role for communicators in helping to smooth the process. Through proactive stakeholder engagement and research, communicators can seek to understand the size and nature of risks faced, helping to inform decision making around which branches to close and the type of communications that could help to mitigate the risk of subsequent reputation damage.  

The author(s)

  • Tom Sweeney Ipsos Global Reputation Centre

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