Mobile banking is set to be more popular than visiting a high street bank branch within two years, according to new forecasts, highlighting how technology is transforming the way Brits bank.
The tipping point will arrive in 2021, according to analysis by the consultancy Caci, when the number of customers regularly using branches will be overtaken by those using apps.
Mobile and internet banking is already widespread in the UK. Over two-thirds of British adults used online banking and 48% used mobile banking in 2018 – up from 41% in the previous year, according to figures by UK Finance, the banking industry lobby group.
Seventy-one percent of customers are expected to use mobile apps for banking by 2024. Over the same period, the number of customers who bank in branches is expected to decline to 55%.
The rapid uptake of app banking has forced Britain’s biggest banks to reassess their costly footprint of physical branches.
Britain’s banks have closed two-thirds of their branches over the last 30 years, according to Which?. There were more than 20,500 branches in the UK in 1988, but just 7,586 at the end of last year.
The decline has been driven by the rise of phone banking, internet banking, and mobile apps, reducing the number of visits people make to a physical branch. Meanwhile, the financial crisis that started in 2008 led to banks losing billions of pounds, further adding pressure to cut costs.
More recently a slew of startup banks that do not operate branches, such as Monzo, N26, Revolut and Starling, have gained licences to offer banking services. Their rapidly growing user-numbers have spurred traditional banks to spend billions on technology.
Lloyds Banking Group, Britain’s biggest high street lender, is in the middle of a two-year £3bn reorganisation. In November, Lloyds said it was cutting 6,000 jobs, but create a further 8,000 in more tech-focused roles. Royal Bank of Scotland, Santander and the owners of the Clydesdale and Yorkshire banks – now known as Virgin Money – have all closed significant numbers of branches in recent years.
However, the decline of branch banking has led to concerns that some customers, particularly those older or less digitally savvy, could lose out. Which? analysis in November showed that 19% of the UK population lived more than two miles from their nearest branch.
Gareth Shaw, head of money at Which?, the consumer group, said: “While digital banking is on the rise, there is still widespread appetite for dedicated bank branches that provide the full-range of financial services and vital access to cash.”
The banking industry has formally committed to securing free access to cash across the UK, after the government set up a taskforce in May to look at the issue. Shaw said the government should consider legislation to ensure people can continue using cash.
Debit cards overtook cash in 2017 as the most prevalent method of payment in the UK, according to UK Finance figures. However, 1.3m adults – concentrated among younger people and the over-85s – still do not have access to a bank account or an e-money alternative, according to the Financial Conduct Authority.
The banks last year agreed a deal with the Post Office which allows users to withdraw cash, deposit cash or check their bank balance to help ensure people in more remote areas can access the banking system.
UK Finance said: “This rapid rate of technological change is set to continue over the coming decade as people embrace the ever-widening number of ways to pay and manage their finances, depending on their needs and lifestyle.
“But technology is not for everyone and maintaining access to cash is vital to ensure no customer is left behind.”