Many new specialist and challenger banks begin life – and continue to operate – as branchless banks.
Most of their operations will be conducted online, while some will deploy regional business development managers to attract business from around the UK.
However, a survey published in May by Saga found that 25% of over 50s would switch bank if their branch closed.
More and more traditional high street banks are closing branches, with Lloyds Banking Group announcing last November plans to close 49 branches.
Despite this, some challengers and specialist banks have been opening branches and regional offices to attract new business.
Challenger Metro Bank revealed at the beginning of this year that it planned to open 12 new stores in 2017.
In May, Metro reported that over one million accounts had been opened since its launch in 2010, while current account deposits grew year-on-year by 71%.
Could more specialist banks open branches or regional hubs?
“Our cloud-based technology – coupled with the fact that we are a branchless bank – has helped us keep a lid on costs and played a central role in enabling us to achieve cash flow break even in just 11 months,” said Joel Perlman, co-founder of OakNorth.
“The traditional bricks and mortar model is neither necessary, nor efficient, and by being branchless we’re able to not only be more agile, but can also pass on these savings to our retail deposit customers in the form of more competitive rates.”
While renting or buying property for branches would add to the costs of a specialist bank, opening regional hubs or offices may become more popular.
For example, Arbuthnot Latham Commercial Banking has opened regional offices in Manchester and Bristol to help serve customers in those regions.
Al Rayan Bank announced last year that it had opened an office in Glasgow to allow Scottish customers to access its range of Sharia-compliant products.
Joel added: “While we currently only have an office in London – where our entire business development team is based and where all of our credit committees take place – we do envisage needing to set up regional hubs as we scale.
“These will be small teams with specific knowledge of the region and, similarly to our office in London, will be places where pre-arranged meetings take place, rather than a walk-in traditional branch.
“We currently have an operations team and business desk in Manchester, so it would make sense to start there, and then look to other key cities for our borrowers, such as Birmingham, Leeds, Liverpool and Newcastle.”
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