How can retail banking adapt for the future?

The way that we bank has changed, and is continuing to change at speed – largely driven by the opportunity technology provides. How people manage their money today is almost unrecognisable from 50 years ago, and if you go back just 10 years active users of our Barclays app have increased from zero to 10 million, a trend that is only increasing.

Looking ahead, and as we move towards an even more digital economy, the question of what this means for the future of retail banking is clearly front of mind. This is why we commissioned the Social Market Foundation (SMF) to conduct their own, independent assessment of the UK’s access to banking services.

What does the report reveal?

Their report shines a light on how the UK’s retail banking model has evolved in recent years, what its future could look like, and the risks and opportunities that may arise as banks adapt to meet changing consumer needs.

SMF want the report to encourage debate on the way forward. They pose a number of recommendations including greater industry collaboration on access to banking services and a more strategic and coordinated focus on digital skills and inclusion across all aspects of society.

The findings tell a clear story on the banking services customers are using today and their needs and expectations for the future:

• Banking is becoming more digital by the day, with 93%¹ of the UK now using online banking. Since the pandemic, 38%² of people say they’ve used online banking more for everyday banking, with 8% no longer visiting branches and 28% using them a lot or a little less.
• There is still demand for some form of “necessary” physical infrastructure, albeit there is gap between what people want here and what they actually use. 45% see physical infrastructure in banking as necessary, yet just 27% visit a bank branch on a monthly basis.
• People are open and willing to different formats of physical infrastructure outside of the traditional branch environment. Within the customer focus groups, there was strong interest in alternative, potentially “better” formats such as banking hubs.

The message here is clear - whilst digital banking is the channel of choice for the vast majority, there is still a level of need for some kind of physical infrastructure. But what this looks like and how customers access future banking services is up for real debate, with consumers largely open to a more flexible and sustainable model than the traditional bricks and mortar branch.

What does the report mean for access to retail banking?

Commenting on the report, Matt Hammerstein, CEO of Barclays UK said: “Given the speed of change and digital disruption we’re seeing today, there is little doubt that we all need to prepare ourselves for a more digital future – across all aspects of society as we know it, including banking.

“As the SMF have clearly pointed to in their findings and recommendations, this transition will present real opportunities to create a better, fairer model that delivers for both consumers and banks in a more digital world. Equally, there are some corresponding risks that must not only be noted, but actively addressed, to ensure that any future model delivers for all, particularly the most vulnerable in society.

“This is a challenge that all banks face and that Barclays is proactively and continuously considering and reflecting in our future plans - delivering on increasing customer demand for better digital services, while finding new, sustainable ways to continue to deliver human support for those people and opportunities where it makes the biggest difference.

“We would welcome further collaboration, in the same spirit as the recent Cash Action Group, to work with the broader industry to guarantee access to sustainable banking services for all as the UK moves towards an increasingly digital economy.”

James Kirkup, director of the Social Market Foundation, said: “This research makes the case for a new way of thinking about access to banking in the emerging economy of the 21^st Century. 

“To ensure that the market meets society’s expectations of inclusion and access, private and public sector actors need to work together on innovative ways to ensure that everyone can benefit from technological and financial change. 

“Industry leaders and policymakers should come together to develop those innovations, because a social market in banking will benefit everyone.”

[1] Source: Statistica – Online banking usage in Great Britain from 2007 to 2022

[2] Source: Opinium survey conducted for the SMF on use of banking services compared with before the COVID-19 pandemic. 23% said they used online banking a lot more, with 15% using it a little more.