Don't knock Barclays' channel strategy

Well that was a short lived media brouhaha. Yesterday kicked off with a call from the BBC asking if I could comment later on the news that Barclays was to axe one-in-four of its branches: in real money, 400 outlets out of around 1,600 units, writes Douglas Blakey

Well that was a short lived media brouhaha. Yesterday kicked off with a call from the BBC asking if I could comment later on the news that Barclays was to axe one-in-four of its branches: in real money, 400 outlets out of around 1,600 units, writes Douglas Blakey

I said yes, can speak later, and added that the numbers sounded quite realistic. This is after all the bank that has closed over 500 branches in the past decade. It is the UK bank that has talked the most enthusiastically about the scope to reduce costs as a result of simple banking transactions migrating from the branch to the digital channel.

And it is the bank that has set an ambitious target of reducing its cost income ratio from the mid 60s to the mid 50s and is looking for cost savings of £1.7bn by 2015. The UK retail banking division will make its contribution to meeting this target, though other business units such as Barcap will contribute greater savings.

By mid-morning yesterday, I was told I need not expect a call from the BBC; by lunch time, Barclays released a press release rubbishing the press reports and a short time later, the BBC re-wrote its story to say that Barclays had not actually confirmed the 400 outlets closure story.

It seems somewhat unlikely that the FT made up its original story. It is however somewhat hard to believe that Barclays ever intended to announce 400 branch closures when it releases its results on 11 February.

While certain banks have been slow optimise their digital banking investments, Barclays cannot be faulted for its current channel strategy: it is not enough just to offer banking services on digital devices. The banks need to use digital to enhance the customer experience and form closer relationships with customers.

Barclays’ Pingit for example has now been downloaded more than 2m times in less than two years. So how will Barclays’ branch network evolve in the short-to-medium term? The bank will continue its current policy of rightsizing its network.

Outdated branches designed for another era will be closed and replaced with smaller and less expensive outlets with greater self-service capabilities, employing fewer bankers.

In towns with two or three outdated branches, there will be a continuing consolidation programme to replace the existing units with one new, modern outlet.

I may be proved utterly wrong but the 400 figure in the original FT story may, if anything, underestimate the scale of change ahead.

It is not an outlandish estimate to forecast that Barclays’ branch network will be around 1,100 by 2019. In other words, about 500 fewer outlets than the current branch network.