High street banks could be forced to invest heavily in refurbishing some of their 10,000 branches to meet new disability discrimination standards.
They could also be prevented from shutting down more than 1,000 of the 4,000 branches earmarked for closure in the next five years, as a result of a new Government body set up last week.
The Government has established the all-party parliamentary group as the first step towards creating a regulator to monitor the closure and automation of bank branches.
This follows a fight against the closures by the Campaign for Community Banking, amid concerns that some communities could be left without adequate banking facilities. The new body could hamper the banks’ drive to cut costs by shutting and automating branches and channelling customers towards cheaper distribution methods, such as automated teller machines (ATMs) and telephone and Internet banking.
The moves form part of a Government initiative to combat discrimination in banking, which is itself part of a root-and-branch overhaul of the entire financial services regulatory framework.
Last week, Don Cruickshank, who is overseeing an inquiry into competition in banking, proposed that the Financial Services Authority (FSA) takes responsibility for promoting competition in the sector.
The anti-discrimination drive could force the banks to invest heavily in their retail networks, for the sake of the 8 million disabled customers who are often among the least wealthy quarter of the population – a group of customers on which the banks lose money.
Neil Whitehead, senior director at branding consultant Fitch, says: “Most high street banks are looking at drive-in and fully automated operations, especially in remote areas where cashier-operated branches simply aren’t profitable. The chances are that if the banks have to spend more on these branches they will close them down.”
Meanwhile, a Treasury task force investigation into access to financial services is due to report to the Government this autumn.
Furthermore, from October banks will be required to make “reasonable adjustments” to any policies, practices and procedures that discriminate against disabled people, as phase three of the Disability Discrimination Act 1995 is implemented. The act applies to the entire goods and services sector and not just to banking.
Phase four will be implemented in 2004 and will require banks to alter building interiors and exteriors which discriminate against the nation’s registered disabled people.
The Government does not intend to offer any financial aid to help companies implement the Act.
It is impossible to quantify the impact that the Disability Discrimination Act will have on the banks because, as with any new legislation, it will require a number of test cases before it can be fully interpreted.
A British Bankers Association spokesman says: “It is going to be expensive to implement the Disability Act in October and in 2004. Some of the older branches in particular will need to have clearer signage, better lighting, wheelchair access and so on. But we see this as an opportunity to make branches more attractive to customers.”
Whitehead, who has worked as a financial services design consultant for more than 20 years, adds: “Refurbishing a branch to ensure it meets the [Disability Discrimination] Act could cost as much as &£60,000 for a standard 5,000 sq ft outlet and &£250,000 for a large 20,000 sq ft site.”
The changes necessary will depend on the individual branch, but in 2004, a satisfactory outlet is likely to require working lifts, additional furniture, specially adapted machines, automatic doors and audio and Braille alternatives to any literature, wide hallways and easy external access.
Most banks have already pumped a lot of resources into making their branches more customer friendly and it is unclear exactly how much more will be required of them by the October deadline.
But the activities of Lloyds TSB, the UK’s largest bank, suggest there is still much expense to come.
The bank is reviewing the layout and furnishing of its 2,400 branches, running a training programme on disability awareness and etiquette for 50,000 staff, creating Braille, large-print and audio cassette alternatives to leaflets in the branches and providing a hearing induction loop at counters to aid those with hearing difficulties.
The Act could also hamper the banks’ plans to drop cashiers altogether from some branches, since they will discriminate against disabled people, unable to work the machines themselves. Either that, or they will need to send a person to the individual’s house.
In some cases automated front lobbies which remain open after office hours may also need an attendant, according to DARAS, the government disability rights advice body.
NatWest is piloting ten automated branches, each initially with an attendant, while Lloyds TSB has just tested a fully automated branch in Theale, Reading.
The company agreed to reinstate the cashiers last week after a public outcry but it has not ruled out fully automated branches in the future. Observers believe Lloyds TSB was looking at a large-scale roll-out of the fully automated model, although the bank dismisses it as no more than an experiment.
Other banks are believed to be cautiously examining fully automated branches.
Meanwhile, the all-party parliamentary group set up by Martin Salter, MP for Reading West, has the backing of more than 60 MPs and is likely to wield great influence.
Salter is regarded as a determined champion of consumer rights after forcing Lloyds TSB to reverse its pilot operation in Reading.
More than 600 communities have been left without a bank in the past ten years as a result of branch closures, with 1,000 more expected in the next five if the banks have their way, says Derek French of the Campaign for Community Banking.
French, who is working closely with Salter, says: “The new regulator would oppose those 1,000 bank closures – of the 4,000 closures Datamonitor predicts in the next five years – that would leave communities with no bank.”
However much the high street banks might say they value their branch networks, they will be looking enviously at their direct competitors, which are unencumbered with an increasingly expensive branch network.