Bank Closures Do Not Increase Digital Payments

Nov 22, 2022


Research published by the University of Bristol shows bank closures are not causing people to switch to digital payments and banking. Instead, cash services remain in high demand and Brits are turning to Post Offices to meet their needs.

Published in September, ‘Cashing in: How do cash deposits at Post Offices change when local bank branches shut?’ analyses the relationship between the closure of local bank branches and cash deposit volumes. The researchers add: ‘it highlights the importance of protecting—and improving—mechanisms such as the Post Office that consumers and businesses use to deposit cash when traditional banking services fail.’

Despite much talk of the UK becoming a ‘cashless’ society, cash withdrawal volumes in 2022 have now recovered to their highest level since the beginning of the coronavirus pandemic in early 2020.
"Cashing in: How do cash deposits at Post Offices change when local bank branches shut?’

The research—which analyses data from over 10,000 branches—shows cash deposits at Post Offices increased generally between April 2021 and March 2022, but saw far steeper increases where nearby bank branches had closed. Urban Post Offices with one or more bank closures within a kilometre saw deposit volumes grow by 27 percent, compared with eight percent for other urban Post Offices. Rural branches that had seen bank closures within five kilometres received an 11 percent increase in deposits, compared with a two percent rise in other rural branches.

Dr Daniel Tischer of the University of Sheffield’s Management School, one of the study’s authors, explains that while access to physical retail and service locations was restricted in 2020, now that behaviour is normalising, it is hardly surprising demand for cash is rising. Small businesses in particular ‘need to have a way to pay in the cash they take.’

What is important here is to recognise that cash is not dead yet, and that many people and local businesses still use cash on a daily basis. We must make sure that those who need access to cash service continue to [have it] in future.
"Cashing in: How do cash deposits at Post Offices change when local bank branches shut?’

Rebecca Ferguson, Media and PR Officer at the University of Sheffield, notes in her summary that the research highlights an important point: losing access to banking facilities does not mean people automatically switch to digital payments. ‘Instead, individuals and local businesses look for an alternative to pay in their cash, which the Post Office offers to most UK banking customers.’

Jamie Evans of the University of Bristol’s Personal Finance Research Centre emphasises ‘it is crucial that we don’t leave cash deposit facilities to crumble’ if the UK is to ensure retailers can continue to accept cash payments. Evans also believes schemes such as the Banking Framework—that enables the Post Office to provide cash services—and the recently-introduced Banking Hubs must be properly supported, especially at a time when more people are turning to cash to manage strained finances.

With growing concerns around the cost of living, it has been reported that many households are increasingly relying on cash to help them keep to their budget.
"Cashing in: How do cash deposits at Post Offices change when local bank branches shut?’

Ross Borkett, Head of Banking at Post Office, welcomed the report’s findings and said the provision of cash services ‘plays a vital role in economic regeneration’ in towns experiencing bank and retail closures.

Post Offices provide a lifeline for small businesses to deposit their cash takings and increasingly for people to budget using cash for the difficult time ahead.
"Ross Borkett, Head of Banking at Post Office
Last Updated: Nov 22, 2022