48% of people who use bank branches are using them less as a result of the pandemic, and 40% expect to continue using them less even after the pandemic has passed.

COVID-19 has accelerated a long-term decline in branch banking as it has led many previously reluctant consumers to adopt digital channels and contactless payments to reduce the risk of spreading the virus, hastening the demise of the transactional bank branch. As a result, the trend towards branch closures is likely to continue apace over the next few years.

However, the bigger risk to branches could come from the banks themselves over-reacting to this consumer shift and misunderstanding the changing role of the branch. Historically branches are seen as part of the operational structure of the bank, with branches that don’t pay their way being closed to cut costs. In a time when few people require physical banking, it becomes hard to justify the operational benefits of maintaining a large-scale physical branch network.

However, the demotion of the branch from essential feature to ‘nice-to-have’ also presents opportunities for banks and building societies choosing to adopt a physical strategy. Banks are widely seen as playing an important role in local communities. Tapping into this sense of localism and using branches as a way to add value to the banking experience will prove popular with certain segments of the population. Opportunities lie ahead for those that view a branch network through the prism of brand building and are not afraid to experiment with the model to address local needs.

• The impact of COVID-19 on the role of the branch in retail banking.

• The current size of the branch network in the UK and the differing strategies being adopted by various banks and building societies.

• How consumers use bank branches and how this differs by demographic.

• What consumers look for in a bank branch and what features would encourage them to visit.

• Consumer attitudes towards branch banking.

The first COVID-19 cases were confirmed in the UK at the end of January, with a small number of cases in February. As the case level rose, the government ordered the closure of non-essential stores on 20 March.

A wider lockdown requiring people to stay at home except for essential shopping, exercise and work ‘if absolutely necessary’ followed on 23 March. It wasn't until 15 June that non-essential stores were allowed to re-open, followed by pubs, restaurants, hotels and hairdressers on 4 July, and many beauty businesses on 13 July.

By September, it had become clear that the UK was at the start of a second wave, and social distancing measures were intensified. Continued increases in infection numbers led to Wales implementing a two-week national lockdown from 19 October, England announcing a full month-long lockdown from 5 November, and Scotland introducing a new five-level system of coronavirus restrictions.

If case numbers remain high, it can be expected that the lockdown will be extended in England, but even if the second national lockdown does end as planned on 2 December, the current plan is to return to the regional tiered approach that was in force before the lockdown, meaning that large parts of the country may still effectively be locked down.

This Report examines consumer attitudes towards bank and building society branches. This Report is primarily concerned with retail banking branches aimed at consumers rather than businesses. Branches are defined as a physical space where at least basic banking services are offered. This can include entirely automated branches but excludes standalone ATMs. Mobile branches and branches that share space in other types of outlet are discussed, but are not included in the market size.