Bank closures ‘increase demand for cash deposit services at Post Offices’

Closures of local bank branches across the UK have increased demand for cash deposit services at Post Offices, according to research.

A study by the universities of Sheffield and Bristol found 10% of Post Offices had been affected by a bank closure within 1km (0.62 miles).

This resulted in a 27% rise in demand for cash deposit services.

In contrast, Post Offices in areas unaffected by bank closures saw an 8% increase in demand for the same services.

Some 800 bank branches closed across the country between April 2021 and March 2022, with the majority in urban areas and cities.

Researchers say the findings show people do not automatically switch to digital payments and banking services when their local bank closes.

Dr Daniel Tischer, from the University of Sheffield’s Management School, said: “During the Covid-19 pandemic, there was a lot of talk about the UK becoming cashless as access to physical retail and service locations were restricted.

“And, of course, many people today are much more comfortable paying with their debit card or mobile now than they were a few years ago.

“To see a sharp increase in people using the Post Office service after a bank branch shuts down, however, is not really that surprising if you think about it. Small businesses 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 and we must make sure that those that need access to cash service continue to do so in future.”

The study also revealed more local branches shutting during a time of post-lockdown economic recovery increased demand for Post Offices further.

For example, three bank closures in the same area resulted in a 58% increase in the number of deposits made at nearby Post Offices.

Previous studies examined public access to cash withdrawals, with this research instead assessing demand for cash deposit services.

Jamie Evans, from the University of Bristol’s Personal Finance Research Centre, said it is crucial cash deposit facilities are not left to “crumble”.

Mr Evans said schemes such as the Banking Framework Three – allowing key banking infrastructure to be provided through the Post Office – as well as the opening of new Banking Hubs were welcomed.

“However, it is imperative schemes like this are supported to continue, as the current pressures on household finance may also mean that some people return to cash to manage their finances and access to banking services in local communities will remain essential for many people,” he added.

“While bank branch closures may seem increasingly inevitable, it is positive to see that Post Office branches are acting as the last line of defence for those individuals, businesses and charities that still depend on cash.

“Through co-ordinated action, such as the provision of shared banking hubs and proper scrutiny of banks’ decisions to close branches, communities need not be left behind.”

Cash withdrawals fell during the pandemic but have since increased and stabilised, though they are still below pre-lockdown levels.

More than 400 additional bank branches are due to close by the end of this year, the researchers said.

Ross Borkett, head of banking at the Post Office, said “vital” services are provided by the company in towns and villages across the UK.

“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,” he said.

Funding for the project was awarded by the Economic and Social Research Council’s Impact Acceleration Account, with data provided by the Post Office.