Welsh Affairs Committee
Oral evidence: Access to high street banking in Wales, HC 660
Wednesday 22 May 2024
Ordered by the House of Commons to be published on 22 May 2024.
Members present: Stephen Crabb (Chair); Ruth Jones; Ben Lake; and Robin Millar.
Questions 1 to 69
Witnesses
I: Christopher Dean, UK Head of Customer Channels, HSBC; Miles Ravenhill, Community Bank Director, Lloyds; Carole Layzell, Managing Director for Barclays Local South, Wales and West, Barclays; and Jimmy Robertson, Head of Branch Network, NatWest.
II: Ross Borkett, Banking Director, Post Office; John Howells, Chief Executive Officer, LINK; and Gareth Oakley, Chief Executive Officer, Cash Access UK.
Written evidence from witnesses:
- Barclays
- LINK
Witnesses: Christopher Dean, Miles Ravenhill, Carole Layzell and Jimmy Robertson.
Q1 Chair: Bore da. Good morning. Welcome to this session of the Welsh Affairs Committee, where we are looking at the future of banking in Wales and high street access to banking. It is the first of three evidence sessions that we are doing on this topic.
Today we have two panels of expert witnesses in front of us to help with our inquiry. For this first panel we are joined by Carole Layzell, who is Managing Director for Barclays Local South-west and Wales, or South Wales and West—you could clarify that in a moment—and we are also joined by Miles Ravenhill, Community Bank Director at Lloyds, Christopher Dean, who is UK Head of Customer Channels at HSBC, and Jimmy Robertson, Head of Branch Network at NatWest.
Could I ask each of you to very briefly introduce yourselves and to say how many branches you currently have in Wales? Carole, perhaps you could go first, please.
Carole Layzell: Yes. Good morning. Bore da. I am the Head of Barclays Local in South Wales and West. In Wales we currently have nine branches and 44 touchpoints, where we support all our community.
Miles Ravenhill: I am the Community Bank Director for Lloyds Banking Group. In Wales we have 62 branches that are currently open. That will drop to 56. In addition to that, we have our 16 community bankers and a further 11 due to go live.
Christopher Dean: I am UK Head of Customer Channels for HSBC. We currently have 33 branches in Wales. We have 198 pop-ups, touchpoints, and we are involved in nine banking hubs and will soon launch three cash pods, which I am happy to explain further.
Jimmy Robertson: Good morning. I am Head of Branch Network for NatWest. We currently have 26 branches in Wales. We have five mobile vans covering 82 distinct communities across Wales. We also have our Welsh call centre in Menai serving 50,000 calls per year.
Q2 Chair: Thank you very much. There is quite a variance in numbers there for existing branches, and it does feel like we are in the middle of another wave of bank branch closures across Wales. Do each of your banks have in mind an optimum number of branches that you want to get to that you regard as the future steady state of high street banking in Wales? Perhaps, Mr Robertson, you could go first.
Jimmy Robertson: We currently have 26 branches across Wales. We have announced all our branch closures for this year. We closed one in Wales earlier this year. We have no plans to close any further branches across Wales for the remainder of this year. Any future decision around it—to answer that point—would be based on customer behaviour and how that changes over the course of time.
Christopher Dean: In terms of our future state, at the start of 2024 we made a branch commitment that no more branches will close in 2024 other than those that were already previously announced.
Miles Ravenhill: As I mentioned, there are 62 today, which will drop to 56. Those are the ones we have announced. There is no further number that is in mind. It will be genuinely following customer behaviour. We take any closure very thoughtfully, so at this stage that is the number.
Carole Layzell: Yes, we have no more planned announced closures for this year. Again, it is worth stating that, due to the demand reducing, we don’t just look at banking needs as branches. They are actually community touchpoints, so there are lots of different options. To your point on future strategy, I think that is the work. Our customers are asking for us to show up in the community in a different way.
Q3 Chair: Ms Layzell, two weeks ago the Barclays branch in Haverfordwest in my constituency closed. It was the last Barclays branch in the county of Pembrokeshire. I understand—and I will defer in a moment to Ben Lake from Ceredigion—that shortly there will be no more Barclays branches left in Ceredigion at all. That is a big chunk of rural west Wales where Barclays will not have a physical branch. That is a pretty big retreat from a physical presence in rural Wales, isn’t it?
Carole Layzell: I mentioned before the way our customers are transacting with us. If we look over the last five years, the number of people using our branches has dropped by 65%, and people who are using our digital app has increased by 120%. While we do not have a physical branch, we do have a physical presence. For me, we have continued to ensure that we have local people serving our local communities, and we are showing up.
You will know that we have the local touchpoint that has just opened in Haverfordwest. It could be the library or leisure centres. It is different across the 44 that we currently have, which we are looking to grow across Wales. We have two vans, and we have our Welsh telephony answering service as well. Our customers are expecting us to show up in a different way. Of course, we have the great relationship with the Post Office to ensure that they still have that access to cash.
Q4 Chair: I appreciate you highlighting those other things, and I am sure we will get into some more detailed questions around what alternatives and replacement services look like for customers.
I was speaking recently to somebody who has a particularly senior role in banking in the UK. His view was that essentially for Wales, given the population structure, eventually there will be a model where the main high street banks have no more than eight—probably 10—branches across the whole of Wales, and that will be the future steady state. There will be no return of branches to the high streets. This wave of branch closures that we are going through will continue into the future.
Most of you have said that there are no further plans for closures, that it will be in response to consumer behaviour, but there is an expectation in the industry, isn’t there, that branches will progressively disappear from more and more high streets? Is that fair? Perhaps, Mr Ravenhill, you can go first.
Miles Ravenhill: As I said earlier, customer behaviour is definitely what we are following. If I look over the last five years at the branches we have closed, they were 50% down in terms of transaction numbers. We are committed to having a branch network. I am unclear on the number today because that customer behaviour needs to flow through, and we will continue to work carefully in observing that.
Clearly, we now have the legislation that we need to follow, working with the regulator, working with LINK, to ensure there is good access to cash before we exit a community. Of course, a lot of our customers are saying they want more convenience, not just being able to traditionally visit a branch for advice. When you combine that with the app, the telephony service, community bankers in particular, if there is a spot where possibly it is more rural or they may struggle to travel a further distance, I am confident customers can talk to somebody if they want to, and they can definitely access cash if they need to.
Q5 Chair: Thank you. Mr Dean, if I could ask the same question to you: do you feel that there is an expectation within this industry—notwithstanding what you have said previously about no further branch closures for your own business for the time being—that two to three years from now a future Welsh Affairs Committee will be inviting colleagues of yours in to talk about why there are very few branches now remaining in large parts of Wales?
Christopher Dean: As my colleagues have said, we have seen a decline in footfall. Since Q1 2020 we have seen a decline of 55% in footfall across branches in Wales. Since 2017 we have seen an increase of 280% in digital usage, and nine out of 10 customers now will do their banking through telephone banking, through online or through digital means.
We will respond to changes in customer behaviour, but we are committed to the communities in which we serve. That is why in 2023 we launched 198 customer pop-ups, and there are effectively colleagues going into the community through libraries and through leisure and community centres to be able to provide those banking services.
Q6 Chair: Thank you. Mr Robertson, is there anything further you want to add?
Jimmy Robertson: On the question about whether we see a final footprint number, that would be no. I would echo what people have said. It is driven by customer behaviour, and the key thing for us is that we bank the whole of the population in Wales. We bank one in five businesses, one in five households in Wales, and we will have a proposition that fits the needs of everybody. That ranges from our Welsh contact centres to our mobile van outreach that we have. It ranges to our branches as well.
We have a strategy called Rural Protect where we want to have 99.9% of the population within 30 minutes’ drive of our banking touchpoints. That is our strategy going forward.
Q7 Chair: But not a branch it is within?
Jimmy Robertson: Yes, within banking facilities.
Q8 Chair: Enabling a face-to-face meeting about banking matters, but not necessarily providing the range of services that any branch would currently provide?
Jimmy Robertson: At the moment we have 94% of the population covered within 30 minutes of a branch, and where possible we would look to maintain that. Where that is not applicable, or where that is not possible, obviously we would look at other alternatives in conjunction with LINK, for example, around banking hubs.
Chair: We will come on to banking hubs in a moment, I think. Ruth Jones, please.
Q9 Ruth Jones: Thank you very much for coming in in person today; it is helpful to see you face to face.
You have explained quite carefully the rationale behind the reasons for cutting down on branch numbers, but I am still not clear. You have talked about footfall. Are the branches that you are closing unprofitable in their own right—they cannot make the money that you need—or is there some other reason that you are closing the branches? What is the rationale behind it? It seems a bit sporadic to me at the moment: which branches are closing, which ones are staying open.
Christopher Dean: When we look at closures, first and foremost, any decision to close a branch is something that we do not take lightly. We will use a number of data points to understand which customers are using the branch, how they are using the branch, and which services they are consuming.
A 55% footfall reduction since Q1 2020 is a customer trend we have observed. We have also seen a subsequent 280% increase in customers using digital technology for their banking needs, and the aforementioned point of nine out of 10 customers now using telephone banking, online or through the app. It is in response to customer behaviour.
Q10 Ruth Jones: I suppose, going to Mr Ravenhill, even if you have a 55% reduction, you still have 45% going in and using that place, and an increase in digital apps and everything could be from one to seven. Stats can be misleading sometimes. We are talking about real people here, real communities. Mr Ravenhill, do you have any thoughts on that?
Miles Ravenhill: When I look at the network today, only 8% of our customer base solely uses the branch network. They are already using those alternative channels, whether that is the app, whether that is the telephony service.
Closing branches is always a very thoughtful process. We have to collect rich data to ensure we are comfortable and confident that we can provide either access to cash or continued advice. We will look at the transaction numbers. We will look at the demographic of the community. We will look at customers who have registered vulnerabilities with us or need assistance. Then we will use that data, along with the FCA’s framework, to see whether it is a viable proposition to do, but only once we have understood what has happened locally.
I have a team of regional directors who are based out in the field. It is their job to oversee the branches. For example, in Wales there are two of those. We will send a specialist team out to the community to assess the community, to look at the alternative provisions, and to make sure that there is access and so on. Even before we think of closing, we go through a lot of detail to ensure we can continue to support.
The phone bank would play an important part, our call centres. The app would play an important part. If we feel that there is still a gap where somebody—not regularly but irregularly—may need to see somebody, we will look at a community banker. That is a colleague who will go on a day that everybody understands where and when, and they can still have that face-to-face conversation if they need to. It is about balancing our banking availability for the customer base.
Q11 Ruth Jones: You made a good point about the pop-ups and things like that. Ms Layzell, on the pop-ups, you say everybody knows. How does everybody know? In your situation, how does anybody know where the pop-ups are going to be, and when and how regularly? Bear in mind that the people you are talking about here may not access social media, may not use the phone apps and things like that.
Carole Layzell: Yes, so before we do a closure we will make sure that we write out to all our regular users of that particular branch. We will also personally contact every single customer in our vulnerability group as well, so we will make a phone call out to them just to let them know and talk through what the alternative services are for them.
Very similar to the peer group here, 93% of our customer base in Wales are already digitally active, using the app, online banking and so on. We have our Welsh telephony services so we can converse in both languages for that, and we continue to listen, as well as obviously the local advertising and social media that you would expect. We will continue to do that. Again, we thank the Committee for its support because I know you have also helped us to encourage and talk about the use of those services.
We listen to our customers regularly. When we do those closures, as well as looking at all the data points and the local dynamics, we listen to what the services are that they are currently using, and what the services are that will be there for them, whether that is through the post office, a banking hub or, indeed, through our amazing colleagues who are there to deliver, helping them to open products, with frauds and scams, and supporting them with their everyday banking needs.
Q12 Ruth Jones: Thank you. Mr Robertson, in spite of all this, there is still a core of people who want to go into the bank who cannot pay in a cheque. I know cheques are old-fashioned, but some people still use them. They cannot pay over the phone, and the hubs are difficult to access for certain people. How do you overcome this? Banking should be an inclusive situation, rather than how it is at the moment where you are looking to almost cut it down and ensure people all move on to the digital way.
Jimmy Robertson: No, I agree, banking should be inclusive. For us, particularly when we look at customers in more vulnerable situations, prior to making a decision to close a branch we will review that data very closely. It is not just about the utilisation of a branch and how many customers are using it. We will look at all our vulnerable customer data.
Our approach around vulnerable customers is that we will make an outreach to them three times by phone. If we don’t contact them—and this is post sending a letter to them—we will send them a personal letter with a dedicated phone number to one of our customer support specialists, who they can speak to and who can help them around any alternative ways of banking that are available to them.
In addition, we have a financial foundations programme, which we take out to schools, community groups, and local businesses, which is helping to educate customers around fraud and scams and around financial options that are available to them. That is also available in Wales.
In addition to that, we do in excess of 10,000 what we call financial health checks, which is basically reviewing the financial wellbeing for each customer in Wales every single year. Again, they are available in Welsh as well. We are very keen to ensure that we do not leave any customers behind.
Q13 Ruth Jones: Thank you. My final question to the four of you at the moment is: Nationwide has committed to keeping all its branches open until 2028, so why can you not make a similar commitment? Should we start with you, Mr Robertson?
Jimmy Robertson: Thanks for that question.
Ruth Jones: Sorry!
Jimmy Robertson: That is okay. Obviously, I cannot comment on Nationwide’s commercial strategy. Our strategy, though, which I can talk about, is to support the whole of Wales, whether that be a personal customer or whether that be a business customer.
On the personal side, like our colleagues on the panel, we have seen a huge increase around utilisation of our mobile app. We have 97% of our journeys completed digitally now. We also have alternatives. I mentioned the call centre, but we also have our contact centre for over 60s, which is open 8.00 am to 8.00 pm, seven days a week. We have our mobile van fleet that services 82 communities.
It is probably worth touching on the SME support we give as well. We are proud of our SME proposition in Wales. We provide £1.5 billion worth of lending into that business community, and in addition—
Q14 Ruth Jones: I will stop you because I know we are going to come on to SMEs in a minute, so don’t worry. Ms Layzell, Nationwide has made this commitment. Why not you?
Carole Layzell: We are committed to investing in Wales. For example, in your own constituency today we are reopening our Newport branch, an investment of £1.5 million. We will continue to invest, but we are investing not through the traditional bricks and mortar of a branch, but through banking needs and showing up in the community in a different way. We will continue to be committed to Wales and that investment, but just not in the traditional bricks and mortar way.
Ruth Jones: I am looking forward to going to the opening of that, against the odds.
Ben Lake: Lucky you!
Q15 Ruth Jones: I know—I’m sorry; that is why I was keeping quiet about it.
Mr Ravenhill, have you anything else to add?
Miles Ravenhill: As I said earlier, I think customer behaviour sits right at the heart of any decision. I am not sure that putting a date on it is particularly helpful because it is the behaviour of the customer that is really important. When you use the framework that we have today, and working with LINK and the regulator, it is about making sure that customers feel supported wherever they are. If it is access to cash, it could be the post office, it could be our branches, or it could be the free to use ATMs. If it is advice, it still could be our branches, it still could be our community bankers. More and more my customers are telling me that they want convenience, and they want to be able to do some of that from the comfort of their own home without travelling, so it is about balancing that whole infrastructure for Wales.
Q16 Ruth Jones: Thank you. Mr Dean, do you have anything to add?
Christopher Dean: As my colleague said, I cannot talk specifically about an individual competitor. However, we are committed to Wales. We made a commitment at the start of 2024 that we will not close any more branches that were not previously announced.
As we observe the customer trends and customer behaviour—as Carole mentioned, banking goes beyond just branches, which is why we are looking at things like cash pods, which will provide deposit and withdrawal capability 24/7 into the communities that we serve. We put 198 touchpoints into the community last year, and we want to do even more. Therefore, it really is going beyond just the bricks and mortar of branches and being there and present in Wales in the community.
Ruth Jones: Thank you. I will hand you back to the Chair now.
Chair: Thanks, Ruth. Ben Lake, please.
Q17 Ben Lake: Thank you all for joining us this morning. Each one of you has mentioned the need and the importance of following customer behaviour and addressing public business needs in the process of making a decision on your branch network.
To begin with, I will ask Mr Dean and Mr Robertson: given that you both have branches in my constituency for the time being, how important do you think it is to follow the needs of customers in rural areas specifically? When you are considering the future of your branch network, how much stock would you place in the rurality, the distances needed to travel between market towns and, therefore, the accessibility to any remaining branches you may have for a very large geographic area? Would you like to start, Mr Dean?
Christopher Dean: We take into account a number of data points when making the difficult decision to close any branch. That will include infrastructure. It will include location and geographical distance to alternatives to banking services. We take it incredibly seriously.
If I look at the Postal Services Act and the data point, they have provided 95% of people within three miles of a post office. The post office is just one alternative, but the cash pods that we are launching will also be able to offer deposit and withdrawal capability to our customers. Being ingrained in the community, being present where our customers want us to be, is wholly important.
We also have one of the biggest sectors in Wales, which is agriculture. We have relationship managers and relationship directors out there speaking to farmers and the agricultural community and partnering with the likes of NFU—the National Farmers’ Union—to ensure that we always have a good read on our customers and we are able to support them where they need it.
Jimmy Robertson: Supporting rural communities is hugely important to us. It is a key part of what we do, similar to some of the assessments that we make around that. We are very proud of our mobile bank fleet, which helps us support rural communities. We cover 82 separate communities across Wales. Most of these are in rural positions, and we visit 41 of those at least once a week and another 41 of those at least once every two weeks. Stops range from 30 minutes to two hours, depending on demand within that local community.
To a point earlier, our rural “Protect” strategy allows us to look at customers that are 30 minutes or more away from a banking touchpoint, and in that case, if they are 30 minutes or more away, we would make the decision not to proceed with any closure, so the rural part is very important. We also support the agricultural sector across Wales.
Q18 Ben Lake: That was very interesting. Ms Layzell and Mr Ravenhill, sadly, you both decided to close your remaining branches in Cardigan. I think you both touched on—as have your colleagues—customer behaviour. I am interested in the process to decide on closing the branches. What consideration, if any, had been given to Saturday opening, for example? I am told by some of the surveys that I have done in my constituency that a Saturday opening would be very popular because people increasingly during the week are not able to pop out at lunchtime, as they may have done in the past. These behaviours have changed. I am just interested in whether any consideration was given to a Saturday opening in some of these branches before the ultimate decision to close them. Could I start with Mr Ravenhill?
Miles Ravenhill: Certainly, thank you. As I said earlier, I am very mindful that it can be more difficult for customers in rural areas to visit our branches. As I said, when we do our assessment of closure we look at the transactions, the demographics and so on.
If the branch was not already open on a Saturday—and I would have to have a look specifically for Cardigan—the likelihood is that it had proved to be quiet previously. Therefore, we had followed customer behaviour to a point and then at some stage you make a decision around how better to use all the facilities of the bank to support that area, whether that be a community banker going less regularly, but being a physical presence is still important in that. I would have to come back to you on Saturday banking.
Carole Layzell: Again, very similar. We would look at the footfall for particular branches, and then when we are looking at our banking services through our touchpoints within your constituency, we would look at the facilities that we have available, if it is a library or a leisure centre, and then try to map how we can access the majority of that footfall at any given time.
Of course, you still have the option of doing telephony banking, again bilingual, and we have our vans. We have two sustainable vans across the whole of Wales that are reaching places where we have never even had branches before, so really getting out there.
Q19 Ben Lake: Just to be clear, there were no branches in Cardigan that were open on Saturday.
Mr Dean and Mr Robertson, I believe none of your branches were open on a Saturday, and they are located in market towns that are the busiest on a Saturday. Some of these town centres and town councils actually have wi-fi data to prove that they are busier on a Saturday.
Moving very quickly on to the next question, when a branch is closed, clearly there are certain electorates within the constituency that are more dependent on that extra support. I think a few of you have touched upon the elderly. One of the concerns that I have received from groups in Ceredigion is the way in which the actual digital apps are not very accessible for those who are visually impaired.
If I can just very quickly ask you: do your digital banking apps or websites have the voice-over capability or, indeed, the zoom-in capacity? I am told that for those who are visually impaired or blind those functions are specifically useful and allow them to maintain the digital banking service. I will start this time with Mr Dean and we will work our way down the panel.
Christopher Dean: I will need to come back to you with the specifics because I think there were four different aspects in that question.
Overall, in terms of how we are supporting the elderly, we have a huge piece of work not just trying to support through digital means but also spending time coaching and developing. We have given away 2,400 tablets to work with the elderly, which has also meant that the situations they were unable to do previously they can do now. It goes beyond banking in that, but I will come back on the specifics.
Miles Ravenhill: On the app, when it was designed the designers looked to ensure that it was as inclusive as possible.
There are two things I would call out in terms of supporting people with vulnerabilities. One would be the zoom-in feature. The second would be that you can use the app signally, so actually convert the pages into British sign language to support people as well.
Carole Layzell: Again, very similar, and I am happy to come back to the Committee with the actual specifics because, like Mr Dean said, there are lots of characteristics there.
I think there are some assumptions, though, that we need to dispel, particularly about the elderly. We published a report back in 2023, and when you think of contactless, for example, for the first time the population between the 85 and 95-year-olds passed 80% on contactless. We will continue to support our elderly customers and, of course, we have the British sign language online on our website and the app. I will give you the specifics after as well.
Ben Lake: Thank you.
Jimmy Robertson: We support British sign language. The range of vulnerabilities is vast. I think the last definition under FCA was 23 separate vulnerabilities. We look to make all our touchpoints, including our app, as accessible as possible, and we take into account that broad range. It would be fair for me to come back to you in writing with that whole range that we do support.
Q20 Robin Millar: I am the MP for Aberconwy in north Wales. We have a problem. We have a different Conwy, Conwy Valley, and SMEs are coming to me explaining that over time what has happened is that services have been closed up the valley. They have been told that counter services, for example, they can access in Llandudno on the coast. Of course, within months we were then told that the branches in Llandudno are closing, and they have to go along the coast to Colwyn Bay. Each one of those can seem rational and sensible, but each one of those is effectively another bus ride. Given the large number of small businesses in Wales, what are you doing to support their face-to-face needs? I will start on the left, please.
Christopher Dean: In the first 10 months of 2023, we opened 23,000 SME accounts, of which nearly 60% of them were—
Q21 Robin Millar: Can you give me some personal feel to this? The numbers just sounds a bit robotic and detached. It may be perfectly valid, but can you give me some personal assurance, please?
Christopher Dean: Yes. So 55% of our SMEs bank with us digitally, and we know, having done a lot of client feedback sessions in trying to ascertain feedback, which we do regularly, one of the greatest things they are looking for is speed. They want time to spend on their business, which they have spent a long time building, so what we have looked to do is to introduce a funding mechanism by which we are committed now to spend $70 million—55 million sterling—on enhancing the digital technology across HSBC. That is able to support people to ensure that they have more time on their business. They can bank more on their terms.
As I said previously, whenever we look to make a closure it is a very difficult decision. In the last round of closures, 99% of customers were within one mile of a post office. We always look at alternatives, and work with LINK, and if there is a recommendation to put an alternative we will always make sure that happens.
Miles Ravenhill: In terms of businesses, depending on their size, obviously, as my peer to the right said, the post office is one of the key ways that they can continue to do it, as well as accessing our branch network. They can bank up to £4,995 in cash daily, and do regular deposits in, servicing it that way.
In addition to that, if we are closing a branch, within the legislation and working with the regulator and LINK, we are looking at whether deposit solutions need to be popped in, whether that is something within the post office itself or whether that is a stand-alone machine to support.
If it is a larger business and we are talking large sums of cash, we will use one of our 10 relationship managers in Wales to work closely with that business. They live there. They are based there, and they want to understand how they can best support that business to operate. Often we can do a courier service to collect and drop off cash for them.
Robin Millar: Thank you. I did not know that. Ms Layzell.
Carole Layzell: Yes, very similar. Like the personal customers, our SME customers are supported wider than just the traditional bricks and mortar of a branch.
The feedback on our Barclays local touchpoints from our SME customers continues to be very positive. We have the post office. I will not repeat what has just been said there, but we also offer something called Barclays Collect, which is where we will go to the SME customers and collect their cash for them. We have over 140 customers across Wales that currently use that service where it is collected, so that saves them the journey to come into a branch or into one of our touchpoints.
Jimmy Robertson: Just to build on that, we have 30 relationship managers across Wales. We also have a direct cash service called Bank to You, which is a courier service that is available. I would also reiterate that we have our mobile van that serves 82 communities across Wales, and some of these are in the more rural areas as well.
Q22 Robin Millar: I will come back to the transportable bank solution because it is not all quite as it seems, is it?
If I understand your answers correctly, you are indicating that there is demand for faster services. There is a demand for different transactions. How much is that the case, and how much does that balance with you driving that change away from face to face and counter-based services, Mr Ravenhill?
Miles Ravenhill: Customer behaviour has naturally been changing. The last data I saw around cash as a transaction was in 2022, and then it took about 14% of the total transactions. That same report showed that it was going to continually decline down to maybe 7% by 2032, so we are genuinely following behaviour.
Like you, I am sure, when you are out and about now, I typically will use my card and I will tap it to pay for something. I tend not to carry as much cash as I used to. Cash is still important. That is why the framework is there to give that access, both for customers and businesses. I think it is their behaviour that we are following.
Christopher Dean: It is very important that we continue to support SMEs. To the point mentioned, the trend is there so customers and clients do want more time back. However, as the data shows, there has been a 49% reduction since 2019 in the processing of coins and notes. That trend is there but we want to ensure that we support all our customers and clients through that journey, but also to ensure that they do have access. That is why things like the cash pods, which we have launched, will enable them to deposit and withdraw 24/7, so not just in the fixed normal hours of 9.00 am to 5.00 pm that you may see in a branch network. It will go beyond that.
Jimmy Robertson: Cash is declining, there is no doubt about that. The cash is still there, so that is why, when we look at our proposition, we will have a proposition that covers the full suite of options available to customers. That is why we have the courier service around Bank to You for SMEs specifically. We also have Intelligent Safe, which allows you to deposit within your own premises, and around that obviously there are other access points as well. We look at the full range of services because we are aware that cash is still there, although it has declined.
Q23 Robin Millar: Ms Layzell, is it a similar picture from yourselves?
Carole Layzell indicated assent
Q24 Robin Millar: Fine. Can I move to the subject of debanking then? Because it is not just about face-to-face and counter service. It is about an overall relationship with banks. There has been a lot of concern about debanking. Why do you think that has become more of a concern for SMEs? I will start with Ms Layzell.
Carole Layzell: Obviously, we make sure that we are supporting local businesses and being part of the community, but we do have a number of regulatory and legal commitments to ensure that we are adhering to the rules of that law.
There are a number of banks that have had to potentially close customer accounts, and the vast majority of that is related to situations such as suspected fraud, financial crime concerns, sanctions, compliance, and indeed non-use of an account as well. Customers are far more likely to be exited because of the need to operate in compliance with the law and the regulatory obligations within that, which is something we take very seriously but we do have those obligations.
Q25 Robin Millar: It is interesting you say that because, of course, Barclays closed 79,000 SME accounts in 2023. How can you be sure that those were all fair decisions?
Carole Layzell: We did a very robust process. We reached out to every single one of those customers between eight and 12 times. It was not just one, two or three times, eight to 12 times to ensure that we got the regulatory notifications and Know Your Customer guidance and legal requirements on there. Yes, in 2023 that was a big programme for us, but we went through a very robust process to ensure that we got the right outcome for customers, and obviously for our legal obligations.
Q26 Robin Millar: Mr Ravenhill, the Treasury Committee did a report into SME finance. It highlighted evidence from SMEs, such as pawnbrokers and slot machine manufacturers, who claimed they had been debanked due to the banks’ concern over potential reputational risks or due to the low risk appetite of the banks. Are some of your customers—SMEs in Wales—being excluded from banking services based on the work or the business they do?
Miles Ravenhill: Not to my knowledge. In terms of that, we would take closing anybody’s account incredibly seriously. I would not add much more than my colleague said about the process to follow and the framework. The vast majority of accounts that we close are because they have become dormant. The only other time that I personally would support a closure is if a customer has been violent or abusive to one of my colleagues.
Q27 Robin Millar: Right. Thank you. Mr Dean, do you recognise that question of risk, and risks to the reputation of your bank, as a reason or as a consideration for debanking a client?
Christopher Dean: There is nothing more I can add than my colleagues have said. There is a rigorous process. We look at the regulations around legalities connected to it. I have nothing more to add.
Robin Millar: Mr Robertson, for completeness.
Jimmy Robertson: We are very consistent around that.
Chair: Thank you very much. Ruth, did you want to come in on this?
Ruth Jones: No, it is okay. I will leave it there.
Q28 Chair: If I could just very quickly come in on this issue about debanking, I have had a business in my constituency contact me about this. Unfortunately, Ms Layzell, it is in relation to the programme that Barclays carried out. He described to me how he tried to take the Know Your Customer forms back to a branch. It was recorded that he had attended the branch on the day, but the forms were not sent to the correct part of your organisation. As a result, he found himself cut off from his account, unable to trade.
Now, you might say, “Well, that is a bit of an outlier, and we do not know the full circumstances”, but it does fit the picture that Mr Millar has been describing where a lot of very small businesses, particularly if they are cash heavy, particularly if they are in rural areas where you do not want to have physical branches anymore, are a nuisance to you. They are not valued customers. These small businesses are effectively a nuisance that you want to get rid of, aren’t they?
Carole Layzell: We are fully committed to the SME market across the UK and in Wales. Yes, I would like to say that was an outlier. I do not know the specifics of that particular case.
Coming back to the point I made earlier to your colleague, it is not just a once touch and then, if the paperwork does not turn up, we would do that. Eight to 12 times we will contact that customer. We will work with them, whether that be telephony, whether that be face to face, whether that be through our relationship managers. We are committed to making sure we get the right outcome for our personal and our SME customers.
Q29 Ben Lake: In terms of looking at customers’ needs and trying to cater for them as best as possible, in my part of the world, of course, the Welsh language is a very important factor to consider. In recent months there have been decisions taken—I think by HSBC—to close the Welsh language phone line. I would be very interested to hear why.
Christopher Dean: That was an incredibly hard decision by HSBC to close the Welsh speaking line in Wales. Of the 607,000 customers we have in Wales only 1,600 unique customers were using the service, so what we have tried to do is to put in a more sustainable model that involves utilising the Welsh speaking language of our colleagues in branches via a callback service. A customer will call our main line. They will then request a call back service, and we have seen that operate as quickly as 10 minutes, but a customer can also, if they want to take longer, obviously call them at a time that is more convenient to them.
The feedback so far has been positive towards that. In Q1 so far we have had 17 customers who came out of the main line and used that service and, as I said, the feedback has been positive and utilises the skills of some of the great colleagues we have across the branch network in Wales.
Q30 Ben Lake: As an HSBC customer myself, I am interested to know whether there are any plans to offer a Welsh language service with the app.
Christopher Dean: We always review our service. It is always under review. It is certainly something I can take away and have a look at.
Q31 Ben Lake: I would very much appreciate it if you would. In terms of the Welsh language line, I know that some of the banks continue to have a fully serviced Welsh telephony line. Mr Robertson, you mentioned the centre in Menai. Is that correct?
Jimmy Robertson: That is correct, yes.
Q32 Ben Lake: Could you explain a little bit about the service and why it is that you have come to a different decision than HSBC?
Jimmy Robertson: It is an important part of our offering, so we are currently working with the Welsh Language Commissioner’s office. Our Chief Financial Officer, Katie Murray, and our Chief Marketing Officer, Margaret Jobling, met with the Deputy Commissioner in March, and we are working towards Welsh language accreditation. I believe we are the only financial institution to be doing that. As we work with them, they will help us adhere to the implementation of it and any development around that as well.
We are fully committed to the Welsh language. We have 16 Welsh-speaking colleagues in Menai. They handle 50,000 calls per year, so just under 1,000 calls a week, and they provide what we see as an invaluable service. Our financial health check, which I talked about earlier, and our financial foundations are all available in Welsh.
Q33 Ben Lake: Thank you. That is very good to hear. Ms Layzell, do you have a Welsh telephony service?
Carole Layzell: We do indeed. We have 58 colleagues who speak Welsh across the whole of the estate and we have that service available Monday to Friday, 9.00 am to 5.00 pm. Ours is slightly different in that we don’t have them based in one place. There are 17 colleagues who are regularly on the phone, but they could be working out of one of our touchpoints; they could be working from home; they could be in one of our branches.
Q34 Ben Lake: The service is there?
Carole Layzell: The service is there. Very similarly, we continue to work with the Welsh Language Commissioner to see how we can continue to improve our services to new and existing customers. Our Welsh language-speaking colleagues will also have a badge when they are out and about in the community to identify that they are Welsh-speaking as well.
Q35 Ben Lake: Finally, Mr Ravenhill.
Miles Ravenhill: Yes, similar. Colleagues in the branches will display the Iaith Gwaith badge, letting people know that they will be able to support the customer in Welsh. For our telephony service we have a Welsh line, but we did not feel it was doing a good enough job. It was a bit sporadic. If somebody was off, it was not staffed because we had a natural decline in Welsh-speaking colleagues to support it. We are reinvesting in that so that by the end of the year anybody will be able to ring the main switchboard—it does not matter from where—ask to speak in Welsh and, working with a specialist provider, we will provide a translation service to enable any customer, at any time, to talk to us about anything. Before it used to be limited to certain transactions in general banking. This will enable us to be far broader and give wider support.
Ben Lake: Thank you. Do we have time for one final—
Chair: Very quickly, because time is moving on.
Q36 Ben Lake: Very quickly, you have all mentioned the importance of serving business customers and personal account customers. If I could make a plea, one customer that is very important across Wales, but specifically in rural areas, are those community account holders or the treasurer account holders. We will not go into detail now because we do not have the time. All I would say is that the branch closures have had a particularly devastating impact on their ability to undertake very basic functions on their accounts, including changing mandates.
I have heard from over 120 organisations in Ceredigion alone, all of whom have concerns about just being able to change mandates on their accounts. None of you have mentioned it today. We will not be able to go into further detail, but if I could plead with you all to look again at the way that you handle and serve community account holders, that would be very much appreciated.
Miles Ravenhill: Just two seconds on that. Ben, I recognise the feedback. Because of that we have changed our online offerings, so now club and society account holders can change their mandate online to save them having to do that.
Ben Lake: Very welcome, good.
Chair: Very quickly.
Q37 Robin Millar: I have a very quick follow-up question. Mr Dean, HSBC has never offered a mobile van banking service to its customers. Mr Ravenhill, Lloyds made a decision to end mobile banking. Can you explain why you do not think mobile banking is important? As briefly as possible, please, because there is a quick follow-up to this.
Christopher Dean: When we make the difficult decision to close a branch, we look at an array of different alternatives.
Robin Millar: This sounds long-winded. Just a simple answer. I am not talking about branches; I am talking about mobile banking solutions.
Christopher Dean: Mobile banking is just one of the solutions, so we look at an array of solutions—cash pods, touchpoints—to be able to support the community in Wales.
Miles Ravenhill: We had 170 stops nationally, 15 of those in Wales. Over the last four years, the frequency of customers visiting them has dropped by 90%. On average, only 14 people were being served at each stop, which had already moved to biweekly, so there was very little usage, Robin.
When we looked at the stops, all had a post office that offered far longer opening hours within 0.3 of a mile and all had free-to-use ATMs. Where the transaction analysis showed that some customers were using them for more than just cash, we put a community banker in. They will visit exactly the same time period, biweekly, in a named place to support customers in the same way.
Robin Millar: I am reassured by that because, Mr Robertson, I know the NatWest service was effectively offline for nearly five or six months, through the combination of a broken vehicle and sickness of the individual who had been operating it. The resilience is not always there, even when the service is being offered.
My concern is—and it touches on what Mr Lake just said—it is knowing the cost of everything and the value of nothing. Wales works on the basis of community. The language is not just a transactional exchange. The banking service in the communities and the work of the treasurers in those community groups is not just a transactional thing. There is an important network of community relationships there. That would be my takeaway to you: do not overlook and neglect that, please. Thank you.
Q38 Chair: Thanks, Robin. A final thought and question from me around the post offices. You have all referred at different points this morning to the role of post offices in filling the gap created when you shut branches. It is true that you see post offices all across our constituencies now playing a bigger role in serving the banking needs of your customers.
Are postmasters being fairly incentivised and rewarded by the banks to do this service for your customers? Mr Ravenswood, you have been speaking a lot this morning because you are dead centre, but perhaps you could go first on that.
Miles Ravenhill: I would not be able to comment on the financial remuneration of the post offices. I do think the banking framework that the banks put in place with the post office to make sure it was there to service its customers was of mutual benefit to both. I would not be able to talk much more about the commerciality of it, though.
Q39 Chair: All right. Because you are expecting the post offices to plug a gap on behalf of customers, aren’t you?
Miles Ravenhill: We do. We entered into a financial arrangement with them to ask them to do that on our behalf.
Chair: Unless any of the other panellists have anything further to add on that question, I will bring this part of the session this morning to a close. We are slightly running over time, but a huge thank you to the four of you for being here with us and answering our questions in such a helpful way. We will suspend this sitting for one minute while we seamlessly transition over to our next panel.
Witnesses: Ross Borkett, John Howells and Gareth Oakley.
Q40 Chair: Good morning and welcome to this second part of today’s session of the Welsh Affairs Committee, looking at the future of high street banking in Wales. In the first session we heard from the four main high street banks. For this second panel we are joined by Ross Borkett, Banking Director at the Post Office, John Howells, Chief Executive Officer at LINK, and Gareth Oakley, Chief Executive Officer of Cash Access UK. All three of your organisations and businesses are, in different ways, helping to plug gaps created by closure of the high street branches that we have just been discussing.
By way of setting for this second part of the discussion, perhaps you could briefly tell us how you are doing that and any particular thoughts you have in response to what you heard from the banks this morning. We will do this in a pretty concise way, so perhaps Mr Howells could go first.
John Howells: I run the LINK. Very concisely, LINK’s job is about making sure the country has a network of free ATMs and recently also a network of shared banking hubs to replace branch closures. We are a not for profit organisation, heavily regulated and owned by the banks and ATM operators. It is an unusual beast, but it is a not for profit public interest organisation.
The key point I would bring out from the previous half hour or so is that cash use is declining. Whether it is being driven by dark forces or whether it is just customer behaviour I will leave for others to decide, but cash is in long-term reduction. It has been for 10 years in this country and most others. I don’t see that changing, so I think we are on track in Wales and across the rest of the UK to becoming a very low-cash country.
That presents a significant problem because currently in Wales we have about 250,000 people who rely on cash and other forms of non-digital services. It is not just cash; it tends to be other face-to-face banking and public sector contacts, whether it is something as simple as a letter from your doctor. We have 250,000 people in Wales who rely on cash and other non-digital services. It is far too many just to leave to market forces.
As you heard, for all sorts of very good reasons, things like bank branches will disappear. I think your comment, Chair, that we will probably only see 50 branches in Wales in a few years’ time is correct. They will not be in 50 places, there will be five in Swansea, but there will be none in Mumbles at all; there probably aren’t any there at the moment.
We have a challenge and something needs to be done about it. If you lose your last branch, LINK’s job—voluntarily—is to recommend whether you get a banking hub or some other form of shared services. My colleague Gareth will talk about Cash Access UK, which then sets that up and runs it, but we have a voluntary arrangement at the moment to try to deal with branch closures.
The issue is very important. Fortunately, it is on a statutory basis, with the FCA now overseeing it, because I think for something as important as this—no matter how willing—commercial organisations or organisations like LINK are not the right place to do it. It should be Government and the FCA running it.
Q41 Chair: That is very helpful, thank you. Mr Oakley, perhaps you could follow that and then we will ask Ross from the Post Office to come in.
Gareth Oakley: We are effectively the next part of the process. Cash Access UK is a non-profit organisation, which is owned by nine major high street banks. Our job is to put banking hubs and deposit solutions into communities once LINK has undertaken an assessment of that community after the last bank in town has closed. In Wales, 10 banking hubs have been recommended. By the end of June there will be five up and running. Those banking hubs have been extremely well received. Despite the fact that those communities are smaller by population than the average across the UK, the usage of those banking hubs is significantly higher than the average across the UK. What we can see is that there are more likely to be more people that depend on bank services and the use of cash in those communities.
Q42 Chair: That is very helpful. Mr Borkett from the Post Office, just very briefly because I know Ruth has some other questions about post office services that she wants to ask you, but just in terms of your response to what we have just heard from the banks.
Ross Borkett: Thank you very much for inviting me today. I look after banking services at the Post Office. We have over 900 post office locations across Wales, offering banking services as part of our core proposition. Postmasters are offering cash withdrawals and cash deposit services for almost every bank in the country and offer a change-giving and cheque service for businesses and consumers when it comes to cheques.
Our network is much more rural in Wales than it is the rest of the country: 60% of our post offices operate within a rural community and the reliance on postmasters to offer a cash service has grown and grown. Over the last three years, the volume of cash that postmasters are handling has gone up 50%, both deposits and withdrawals. We now serve over £200 million a month through our Welsh network. As bank networks have changed, there is much more reliance on local community postmasters in providing cash services.
Chair: Thank you very much. Ruth Jones, do you want to follow on?
Q43 Ruth Jones: You have already heard the first panel. Mr Borkett, in terms of the closures of banks, you have already mentioned an increase in transactions and things. Do you see that continuing? Because we were told very clearly in the first panel that cash is disappearing, but now you are telling us that cash is not disappearing.
Ross Borkett: I agree. I don’t think cash is disappearing. I think we can see overall the use of cash is in decline. That is up for debate, but there is still a huge number of people who are either wholly or partly reliant on cash. Certainly, we see that as other alternatives like bank branches consolidate their networks, the reliance on our network has only gone up. We see that not just in Wales, but across the whole country.
Q44 Ruth Jones: Newport West is not a problem. We have lots of facilities and obviously my colleagues are very jealous about Newport West, but in terms of going up the valley, say to Islwyn, Crosskeys, Abercarn and Newbridge, post offices are closing there. My worry is the people who live in those areas, the valleys, either have to travel down to Newport or for SMEs—for instance, their cash drop-offs and things like that—it is becoming more and more restricted. How is that being managed?
Ross Borkett: The way we operate our network is that we have a commitment to Government to maintain our network size and meet six access criteria. We must have a presence within certain percentages of the population and that is a commitment we have had for a long time and we continue to meet.
You are right, we do have some closures. With a network of our size—we have over 11,500 branches across the country—almost all run under a retail franchise-type model. There will be times a postmaster, for example, may retire and, therefore, that post office will close. What we try to do is to reopen. In fact, across the country last year we have opened more branches than we have closed. We don’t go out and proactively close. We react to those situations. What we look at is: are we still meeting the national access criteria, the commitment we have made? If we are not, then we need to take action and we will work to do that. That is what we do within our world.
To build on that, the world going forward under the access to cash regulations means that LINK will play an important role of assessing not just what is happening around post office cash services but all cash services in communities to make sure that that assessment is done. If there needs to be an intervention, then it is made.
Q45 Ruth Jones: I understand what you are saying there about the cash closing and things like that, but on sub-postmasters, certainly in my area, in the valleys coming down into Newport, there is a problem. They cannot get sub-postmasters. Once somebody retires, it is very difficult to get somebody in. The post offices are closing and that is a big issue for that area. The banks have gone, then the post office is not there and they cannot get free cash. I am sure we will come on to that in a minute, but I am frustrated by this.
Ross Borkett: No, I understand. There are a few things to try to take you through that. You are right: it is challenging sometimes in some communities to find a willing business to take on a post office. There are some communities where there are no businesses, so maybe the last community shop closed, which hosted the post office, and it can be very difficult to support that. We do look at where we run our own outreach vans into communities. In some cases we would offer that service. In some cases we can bring in a temporary service while we try to look for a more permanent solution. Especially if we are not meeting our access criteria commitment, then we will need to do that to make sure that we do.
It is something we continue to look at. When we look at a proposition we make towards postmasters, we obviously try to make it as attractive as possible. Obviously, where we are struggling, we try to make it more attractive to attract other people to take on that facility.
Ruth Jones: I may come back to you in future on that.
Ross Borkett: Of course.
Q46 Robin Millar: I have two groups of questions, first mostly to Mr Borkett about the Post Office, but then I want to develop that into banking hubs. Gentlemen, I will bring you in there, if I may. The numbers speak for themselves with regards to post offices. There is pretty good coverage across Wales, isn’t there?
Ross Borkett: Correct. In fact, we have a higher density of post offices in Wales than we do for the rest of the UK, in the nature of being a more rural set of communities. We have a post office for every 3,300 people within Wales versus 5,500 for the rest of the UK.
Q47 Robin Millar: We have to go under the skin of those figures because the accessibility is a real issue, rather than density. In terms of that, how far do people have to travel in Wales on average to a post office versus the rest of the UK?
Ross Borkett: I am afraid I would have to come back to you with those figures exactly. We do meet our access criteria, as I laid out, which set out a set of geographical requirements. For example, we have to have 95% of rural population within three miles of a post office, as well as a number of other criteria. We do meet those criteria, but I would have to come back to you with an exact figure, I am afraid.
Robin Millar: If you could, please, I would be grateful.
Ross Borkett: Of course.
Q48 Robin Millar: In terms of that access and that availability, how long does it take to open a replacement branch if one closes?
Ross Borkett: There are three parts to an opening. The first part is to find a postmaster or applicant to become a postmaster. The time that takes varies; it depends how quickly we can do that. Once we have identified somebody, we go through a two-month consultation with the community to understand whether what we are proposing is acceptable and it meets the needs. If you take an example where we are going to put something into a community but it is at the top of a hill, then that is not very accessible for the community. We try to get that feedback during that phase. It then takes about three to four months to do the opening, so that is physical changes sometimes to the premises, but it is also the training of staff, often hiring new staff and getting ready. It typically takes three to four months from that point.
Q49 Robin Millar: On that point, we should mention the elephant in the room: have you seen a reduction in the number of people coming forward as a result of the Horizon scandal?
Ross Borkett: That is a good question. I don’t have that information to hand, I am afraid, but I can certainly go and ask colleagues.
Q50 Robin Millar: I would certainly be interested. I think the Committee would be interested to know whether that has had an impact at all.
In terms of the business, though, of the post office, what is that based on? Is it the number of transactions; is it the size of the transactions? Perhaps you could just give us an indication.
Ross Borkett: Of course. It is both, as far as our cash business is concerned. Yes, it is partly based on the volume, but it is also based on value. In particular, if you think about the deposit work that postmasters do, the more money there is to count, the longer that transaction takes and, therefore, the amount of remuneration that we pay to postmasters is higher.
Q51 Robin Millar: Does it include any assessment of the number of people who come into the post office, in the sense of literally the number of people who might come in to drop into the post office?
Ross Borkett: Sorry, I am not following your question.
Robin Millar: This is exactly the point. I made the point in the last evidence session that it is about the cost of everything but the value of nothing, and there is a lot of focus on transactions. I was going to ask you a question about how you track the use of the Welsh language, for example, in post offices, but I am concerned that all these numbers are not addressing a deeper issue, which is the place within a community and its cohesion, which places like banking services and post offices—I could talk about pubs and churches and other things—offer. That is very important and it gets missed from these conversations. That is why I ask about the business model. Is it purely transactional or is there something more to it? Do you recognise that in my description?
Ross Borkett: I understand what you are saying, yes. When we look at how we partner with the postmasters in supporting our communities, there are different models of post offices. You are right, we have a commercial model around banking and our other services, which are predominantly transaction based, but for some of our communities, which are very low-volume communities, they add enormous value to that community. We have community branches where we will fund a direct payment, backed by taxpayer subsidy, that we give to the post office to keep those branches open because we recognise that they are providing an enormous amount of social value. There will be some communities where it is not a profitable enterprise to operate that post office, but we recognise what the postmaster and their staff are doing for that community is central.
Q52 Robin Millar: That is very interesting, thank you. I was not aware of that, but I am encouraged by it.
If I can turn to the question of banking hubs, perhaps I will start with you again, Mr Borkett. What do banking hubs offer that is not currently offered by post office branches?
Ross Borkett: If you think of a banking hub in two parts, there is the counter, where you can transact for cash. Those services are the same as what are offered in the post office; they are just the same counter service. Then there is the community banking element of it, which I am sure Mr Oakley can talk more about, which we obviously do not offer in the post office, with the banking reps coming in.
Q53 Robin Millar: Mr Oakley, can hubs offer all the services that bank branches offer?
Gareth Oakley: They offer the majority of services that you can get in a bank branch. As you have already said, the vast majority of financial transactions are undertaken by the post office. That is almost 100% of what you could do in a bank branch; it is not absolutely everything.
The other part of the offering is that community bankers are represented by each of the firms in the local area and the service that they offer is dependent on the strategy of the individual banks, so they will vary slightly. Having said that, all the banks that are members of Cash Access UK have reached an agreement with HMT to rationalise those services and be a lot more transparent and clearer about what services will be available and where some banks are yet to offer some of the services. They are working on that between now and the end of the year so that there is more consistency across the group.
Q54 Robin Millar: Mr Howells, thank you for your patience. How is LINK working with the Post Office and Cash Access UK in the creation, delivery and operation of banking hubs?
John Howells: I think it is a very good question. The legislation only applies to cash, so it has nothing to do with face-to-face services, even though banking hubs, to the credit of the banks, voluntarily offer banking services at the moment. I think there is an interesting question about whether the legislation is strong enough, given that it only applies to cash, because over a five-year period things can change.
Today’s banking hub could become an automated machine in the garage and a chair at the back of the library. I just flag that as an interesting question, which the FCA has been very clear is not in its scope at the moment, so I think it is making sure that banking hubs, if that is the thing that communities want, end up getting delivered in the long run. It is a very important question that LINK wants to raise and to make sure that that is clearly on your agenda.
If I look at banking hubs today, as they are being rolled out, they are universally popular. Though you can always argue about how many and which towns, if we are going into a world in Wales where we are going from 200 commercial bank branches to 50 and they will be concentrated in the major towns, whether in Cardiff or Swansea, et cetera, we probably could have a reasonably satisfactory position if we supplemented those 50 branches with, say, another 50 banking hubs over the course of the next five years.
There will always be questions about particularly difficult rural areas and whether they are satisfactory, but with 50 commercial branches, 50 banking hubs, 900 post offices—very important to make sure that they stay there—and a large network of free ATMS, I think I could make a pretty good argument that that will give satisfactory access to cash for Welsh consumers and companies operating in Wales, always accepting that at the margin there could be difficulties. The FCA will be looking after that.
Q55 Robin Millar: Thank you. I just urge you to remember that Wales is not a homogenous country and that north Wales is very different from mid Wales and south Wales, so some of those ratios need refining, at least at a regional level.
Mr Oakley, are banking hubs taking too long to open and what could be done to speed up that roll-out?
Gareth Oakley: The time that it takes to open a banking hub, from the time that we are advised to the time that it opens, is not that dissimilar from the time it would take in a residential transaction, from identifying a property, particularly if you had to refurbish and start from scratch. There are two important points, though, one that will offer you some reassurance and another one that will hopefully give you a bit of context.
The first one is that, under the legislation and the regulation that will come in some time towards the end of the year, a bank can’t close its branch until a banking hub is available and ready. In July last year we reached an agreement with the banks to say that they would stay open for 12 months voluntarily and that we would guarantee that we had something in place to enable them to leave. None the less, as we approach the end of the year, the legislation insists on it, it is law, so that hopefully provides some reassurance.
In terms of context, in terms of the speed, one of the things that is very different from the process that we undertake to, let’s say, a major coffee chain or a bakery is that we get advised that a banking hub is required by LINK at the same time the general public do. It is effectively coincidence if there is a property that is available for us to move into at that point, so a lot of the time is spent searching for a property, remembering that we need to be specifically in that high street. If you were to compare that to a major coffee chain, they will be surveying maybe 500 or 600 communities and they will select them as the properties become available. There can be anything from two weeks to six to eight months of trying to find the right property.
Q56 Robin Millar: What you are describing is quite a competitive environment for that high street presence; is that correct?
Gareth Oakley: That is right. If you think about the general strategy of a retailer, they will be monitoring their preferred community all the time. It may be that their agents are already speaking to landlords and as soon as a property becomes available, if it is one that suits them, they will be in, whereas we get advised and then we walk into the high street and say, “Okay, what’s available?”
Robin Millar: I have two final questions.
Chair: Quickly, Robin.
Q57 Robin Millar: First of all, what could be done to improve your competitiveness in terms of accessing those? Secondly, to Mr Howells, what could be done to improve the operation of banking hubs?
Gareth Oakley: The reason why the process is as it is is due to competition law. When the banks took competition advice, it was deemed that this process had to effectively be done confidentially and that the commercial decisions of one bank could not affect a decision of another, so that is very difficult to change.
However, there are things that we can do, and we continue to learn and iterate our processes. We are finding ways to go faster and we will also find ways to bring in alternatives. We are quite well-progressed, as an example, in conversations with supermarkets about instore franchises and different options that will enable us to have more choice, effectively.
John Howells: I think the legislation will bring two very strong improvements straight away, which will be that you can’t close your branch until the banking hub or whatever the agreed facility is is open, a clear and simple rule that you can explain to any community and that makes good sense. The legislation also gives excellent powers to deliver access to cash. As I said, there is a question mark about whether it goes far enough on other banking services. I believe you asked a question earlier about it, things like advice if you are concerned about fraud or if you have a probate issue.
Those are all things that are, to the banks’ credit, being delivered on voluntarily through banking hubs. I am not sure whether that is satisfactory, so I wonder whether there should be stronger control over making sure you have face-to-face banking in communities and not just access to cash, important though that is.
If I play it forward just a few more years, if I may—because like it or not, cash usage in Wales is dropping fast and that availability will be a problem for consumers in, say, five years’ time—we should do something to improve digital inclusion. It is a missing piece of the national strategy. I think that these banking hubs that Gareth’s organisation is opening up in every major high street in Wales could be very useful vehicles for helping with digital inclusion, because in five years’ time cash, whether we like it or not, will be a very low part of most people’s day to day transactions in every level of society. We should be thinking about how we deal with that. The bank hubs could be improved to deal with that.
Q58 Chair: Thank you very much. I will jump in with a couple of supplementary questions here, following on from your remarks there, Mr Howells. Would you agree that the history of legislation and regulation around this is always that it is playing catch-up and essentially allowing the horse to bolt before something is done to try to shut the door?
John Howells: I think the access to cash legislation is an excellent example of legislation in the nick of time, which had cross-party support. All credit to everybody involved, because the network of branches is disappearing before our eyes, but we have a mechanism and some legislation to deal with it.
Q59 Chair: Nevertheless, vulnerable and not necessarily future-proofed, given what you have said.
John Howells: That is my concern. I think it lacks teeth. It lacks any control over face-to-face banking services, which is an issue. It lacks digital inclusion, which I think will become an issue very rapidly, in the lifetime of the next Government. I also, for what it is worth, think the focus on large clearing banks feels a little bit dated.
Other large companies, including the large tech companies, have a responsibility here. Rather than trying to get the same five large banks, which I think struggle sometimes with their own profitability, to pay for all this, I would like to see a future Government look at digital inclusion and how we involve some of the big tech companies in supporting every consumer in the UK, not just the 85% who are already very comfortable using digital.
Q60 Chair: That is very helpful, thank you. Mr Borkett, last week I popped into the post office in the town of Pembroke. It was quite remarkable. It is an old post office building, but you go in and it feels very much like a children’s toy and clothing shop. It is called Edu Toys, and depending on where you stand in that building, it either feels very much like an educational toy shop or a post office because they coexist together. It is an excellent example of how two quite different businesses are supporting each other essentially under the same roof. I would encourage you to go and visit them. They told me that they are now doing transactions for 26 different banks.
Doesn’t it feel to you a bit frustrating, with all the discussion about banking hubs? You guys are already doing it. Why aren’t a number of key post office counters being identified as pre-eminent locations for doing banking transactions and they become the banking hubs?
Ross Borkett: I think you are right. We sometimes get postmasters saying it is one of our best-kept secrets, that you can do so much cash and banking within a post office. It is something we continue to try to raise awareness on and I would ask everyone who is watching this, go and support your local post office and use it for cash services. We are supporting cash access in the development and running of banking hubs. We are exploring some models where we are co-locating post offices and banking hubs. It makes a lot of sense to me that a local postmaster is often already the centre of that community and is already providing cash services. Well, let’s bring the banking needs and the cash needs together under a single place.
One of the many benefits we have seen with the new regulations coming in is it is driving the industry to innovate and to think about some different ways of doing things. My view is we have a great platform through local post offices to build on. The more we do that, the more we invest in that local post office to do more and more, I think the better for that community. It becomes a more sustainable solution. I agree, I think there are many opportunities to build on that. It is something that Mr Oakley talked about and I talk about with the banks, about how we continue to strengthen that partnership.
Q61 Chair: Is there somebody leading that discussion and doing some scanning of where gaps are emerging and saying, “Right, that would be a great place for post office and a banking hub to be collocated” or is all this being left to local personalities and local activism to basically work out? In which case, you will have a very varied spread of these facilities.
Ross Borkett: I think there is a little bit of both. I would say, as three organisations here, we are working closer and closer together. As the voluntary processes that are being set up through LINK become mandatory processes this year under the regulations, I think that will provide a good process for that assessment and onwards from that, assessing what the best solution is for that community.
But you are right: there is a local element to this. Some of our post offices, absolutely you could do something together. Some of them are quite small, some of them might not have the opportunity, and we have to recognise that there will be some communities where we could do something; there will be some we may not be able to.
Q62 Chair: Thank you. Mr Oakley, is there anything further you would add to that point?
Gareth Oakley: I agree with an awful lot of that. As I have said, we effectively have to react to the closure and we are unable to get ahead of the process, if you like. Having said that, we can see that we need to be increasingly more creative in terms of, as I have already pointed out, moving as quickly as we possibly can.
I think the only thing, just to add additional context, is that when the original research was done around what is the best model, particularly for SMEs, they want to be able to undertake their transactions in a secure and confidential environment. Sometimes some of the post offices are very small and not able to do that. Then there is also the community banker aspect. The ability to get face-to-face advice is also considered to be an important aspect. Having said that, as Ross has already said, we need to be creative in delivering the right solution for the community.
Chair: Thank you, that is helpful. Ben Lake, please.
Q63 Ben Lake: Thank you, gentlemen, for coming in today. Mr Howells, I fully agree with you that we need to keep an eye on the accessibility of banking services, face-to-face banking services as well as access to cash.
Just turning to the banking hubs and some of the criteria by which an area might be considered for the establishment of a banking hub, am I correct in thinking that there is a certain level of population that you might want to see before considering locating a banking hub in a particular area?
John Howells: Correct. The criteria are industry set. There is a big complicated formula, but broadly it is 7,000 people, 70 shops, so that will pick up large and medium-size conurbations. It will not pick up smaller ones. I think there are opportunities to improve that to consider rural clusters—not just in Wales, but that would be an example—so that it is not just a threshold, but looks at a patch.
In the press there is a fairly well-publicised problem with retail-only branches. Nationwide is often picked up, but also Halifax and Santander, where if one of those branches remain in a town that would otherwise qualify, they don’t get any help. That is great if you are a retail consumer, but if you are a full business, those organisations do not do small business banking.
I am hoping that when the FCA publishes its rules within weeks, it will have proposals that will deal with places with lots of shops. They need a banking hub, and rural clusters, because in places like north Wales, central Wales and Norfolk, that clustering is important to look at. They are missing out at the moment and I think there is a case for it. That is the reason for moving it from a voluntary industry thing set by 10 banks to FCA controlled. Let’s make sure we are looking at it for the needs of the community properly.
Q64 Ben Lake: The point is very well made there. There are market towns in my own constituency that will easily surpass the retail criteria in terms of having enough businesses and shops, but then might struggle in terms of the population, purely due to the fact that they are market towns and serve the larger cluster, as you so eloquently said. It would be very welcome if the FCA is able to look at that.
John Howells: I think there was an example over here about north Wales with Llandudno, that each one closes and it goes another 10 miles down the coast. I know Llandudno is big enough. It should always have a banking hub. If all the branches close there, that should be the last one that closes because you have a long stretch of rural communities that will not get a banking hub. I am sure it is the same in your community as well.
Q65 Ben Lake: Very briefly, in terms of the point you made there about when you might have a town or a settlement with just the one bank left and that might be then preventing further consideration of other alternatives, is that something that the FCA could also now look again at changing?
John Howells: I know it has been suggested the FCA look at it. We ourselves have written in. We do not think it is acceptable to have a community with a large number of retailers not having a banking hub just because you happen to have a retail branch there. That needs changing and someone needs to set the number, 50 shops, 100 shops or whatever. That is an easy thing to do and I am hopeful that that will be what we get out of the new rules set by the FCA within the next few weeks.
Q66 Ben Lake: Thank you very much. Finally from me, if you wouldn’t mind just setting out the way in which you approach the different alternative solutions, whether that a free to use ATM, a cash deposit facility and then also a banking hub. How do you decide between those solutions when considering a particular community?
John Howells: We are given a menu of solutions by Cash Access UK, so I have a banking hub, I have a deposit service, which can feature as a spruced-up post office or a stand-alone facility, or I have a free ATM. Then we have individual criteria, so if you drop below 7,000 people and 70 shops, you move from a banking hub to post offices, deposit services and free ATMs. We set those rules at the moment, those boundaries. It will be by regulation. I would argue that is good, with my caveat again: it only applies to cash. It is great that it is voluntary for the face-to-face banking services, but if there is a problem in a couple of years’ time because it all gets too expensive, it is not good enough, in my view, just to have access in the community. You need that face-to-face basic banking. I think it is a whole.
Q67 Ruth Jones: I will be very quick. Mr Howells, you mentioned it is not just cash, but I am going back to cash now and free ATMs because at the moment, certainly in the valley communities coming into Newport West, for instance, there is an issue with the lack of free ATMs. There are lots of convenience stores with machines in them and then you go, “Oh, it will cost £1.75 or £2” or whatever.
As you rightly say, the amount of cash that is being taken out is small, so therefore the percentage that is being paid is that much more now. I am just thinking, in terms of those places, how quickly can you get the ATM in? Because these communities are really struggling.
John Howells: It shouldn’t be the case. If you have a community that does not have free cash access through an ATM or a post office counter, then LINK’s existing policies will deal with that. We define a high street as five shops, so it is pretty small. If you have a community that has five shops and it has a pay to use ATM and there is nothing else within a kilometre, we will pay to get that fixed. You should just come to me directly and we will deal with that. We can argue about banking hubs and deposit services, but my view is that free ATMs are the last bastion and you should not have even a very, very small community that has a pay to use only.
Q68 Ruth Jones: It is like a surgery today; it is marvellous. I shall be coming back to you as well. Thank you very much.
I have one final question. In terms of the ATMs, there are a number that provide Welsh language. In fact, not that I am a Welsh speaker, but I use it just to try to keep it going, if you like, in Newport. How many have Welsh language facilities in Wales? If one is broken, how quickly does it get fixed?
John Howells: We do not run the ATMs. That is up to the 10-odd operators out there. I phoned up the two biggest yesterday just to confirm what their approach to Welsh language is. As expected, they have said it is up to the location, so they provide Welsh language facilities on ATMs. If the shop or the library or the school says, “We want that feature on there” they will get it. If they say they don’t, then they don’t. That is up to them. There are 2,000 ATMs, so they go up and down, but it is available if the location with the ATM wants it.
Q69 Ruth Jones: In terms of getting things fixed when they are broken?
John Howells: That should not happen. Within our rules for ATMs, they have to be running 97% of the time. It is helped by the fact that if it is not working, the operator does not get paid, so they have a very strong incentive to make sure they are up and running. Though there are occasionally problems—I know there was something in the press a couple of days ago in Wales—they are one-off, not very often, touch wood.
We are all over that, so if you have a problem or you hear of somebody who has a problem with an ATM not operating, come to us. We can get that fixed straight away, but I would hope that is very rare and due to some particular problem like the shop was raided or the machine has broken or something like that.
Ruth Jones: Thank you, that is very helpful. I will hand you back to the Chair.
Chair: Thank you very much. Unless there are any final questions from colleagues, it just remains to say thank you to you all. It has been an incredibly informative and helpful session, so thank you very much for taking the time to be with us this morning. It will help us for our next two evidence sessions that we are holding, looking at the future of high street banking. I am sure we will be in touch with you all again, but we will bring this session to a close for now.