'Easy profits' corporate banking model is abandoning rural Scots, think-tank finds

Bank branches and cash machines are are leaving Scottish rural villages and towns at an alarming rate

  • Hundreds of bank branches and cash machines are closing across Scotland.
  • Rural and poorer communities are particualrly hard hit.
  • The changes reflect the increasingly remote and corporate nature of banking.
  • New proposals would see the creation of community owned banks.

THE corporate model of banking is to blame for the retreat of banking infrastructure from rural Scotland, according to a left-of-centre think tank.

Increasingly remote and transactional banking practices have left many rural and semi-rural Scottish communities, as well as poorer Scots, struggling for access to cash and other banking services in recent years, according to Common Weal.

The claims come ahead of the launch of a new paper on community owned retail banks and after revelations of the extent of the loss of cash machines and bank branches across Scotland.

According to the Which consumer survey group, in just the last year, 290 cash machines have been withdrawn from Scottish communities. Over three hundred bank branches have also been closed. These closures have hit poorer and more rural areas harder, where more people use cash.

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Speaking to CommonSpace, Common Weal head of policy Craig Dalziell said that the withdrawal of banking services was in line with the direction of travel of modern corporate banking.

He said: "As always, the search for quick and easy profits tends to exclude rural areas. Even if cash machines don't leave an area entirely, we may soon start to see a rise in the number which directly charge people to access their own money.

"A flat withdrawal fee will disproportionately hurt someone who withdraws small amounts of money frequently compared to someone who uses the ATM infrequently. We already see this in some places like the United States where poorer districts find it much harder to maintain free access to what little money they have. It is also worth noting that in many parts of rural Scotland, access to the internet is itself slow or unreliable. This means that the prospect of transitioning to an internet-based cashless society may be a dubious one at best."

Recent research by the Royal Society of Arts (RSA) found that contrary to widespread assumption that the UK was moving seamlessly into a post-cash society with the growth of online shopping, contactless cards and other forms of digital payment, the numbers of people relying almost wholly on cash as a form of payment had actually increased from 1.6 milliion to 2.2 million since 2014.

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The research also found that large numbers of younger people, expected by some to have departed from traditional banking practices, prefer to engage directly with their banks in local branches.

Dalziell said: "Common Weal's proposals - which we discussed in our 2016 paper Banking for the Common Good and which will be the subject of a further paper in the near future - include measures to ensure that banking is kept as locally as possible - at a community rather than national or multi-national level. Between this and an embedded system of mutual ownership, it would act to prevent corporate mismanagement. 

"As a mutual, the bank would be directly accountable to its customers rather than remote shareholders. As a network of locals, the bank's focus would be strictly held upon the local area it is serving and investing in rather than multi-national ambitions or the arcane world of speculation, derivatives and other financial 'services'."

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Gemma Bone, author of the forthcoming Common Weal report on community owned retail banks and economics researcher at Newcastle University, said that the current model of banking undermined smaller local businesses and threatened to disrupt local economies, and that her forthcoming policy would address this.

She said: "If your nearest branch is 14, 15, 16 miles away, you will need to shut up shop to be able to travel to your nearest branch. With our proposal even remote rural areas could have automated services which would be open 24 hours.

"Those branches will be accessible to people to get cash out as well. The main thing is just about having greater accessibility. This would also get around the problem of banks introducing higher and higher banking charges."

Dalziell also said he welcomed Which's calls for an independent cash regulator: "Which has made a very positive step by calling for regulations to protect access to cash and I absolutely welcome and support it - especially as a stop-gap measure while we consider upcoming proposals for more fundamental reform of the financial sector."

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