Exploring geographical patterns in the changing landscape of retail banking services in Wales

This research paper aims to identify changes in branch-led retail banking provision in Wales over the past decade to help aid policymakers at the Welsh Government consider appropriate strategies to respond to the impact that branch closures on having on local communities.

Date added 22 November 2021
Last updated 22 November 2021

The primary focus of this research paper was to address one of the recommendations of the Welsh Government’s Economy, Infrastructure and Skills Committee, namely the call for more mapping and analytical insight into potential changes in the branch-led banking network in Wales.

The reason for this research focus was due to evidence presented to the committee that branch closures and the loss of ATMs was felt to be a concern amongst 50% of all survey respondents, with 87% of personal banking customers and 78% of business customers reporting they had been impacted by recent closures.

By properly mapping the gaps in banking services overall – including access to banks, Post Offices, free-to-use ATMS and connectivity for digital banking – it was anticipated that the Welsh Government would benefit from an improved understanding of the geography of retail banking services in Wales which could allow for the impacts of recent changes to be addressed, particularly in rural communities experiencing the greatest loss in provision.

Data from 2008, 2018, and 2020 was utilised in this study to conduct a broad range of analyses to provide a comprehensive picture of patterns in the geographical provision of retail banking services across Wales. This data showed that the greatest increases in travel distance to their nearest branch over the decade were recorded in Montgomeryshire (+4.47 km), Clwyd South (+3.43 km), and Arfon, Dwyfor Meirionnydd, and Brecon and Radnorshire, with branch closures adding around 2.5 km of extra travel.

In contrast, the populous areas of the South East reported much smaller distances and generally experienced much smaller changes. Cardiff North, Cardiff Central, Rhonda, Swansea West, and Cardiff South and Penarth constituencies recorded the closest distances to branches in 2008, and this list was largely unchanged in 2018. It should be noted, however, that nearest distance to provider takes no account of the balance of supply to demand, with the inevitable outcome that it generally records poorer accessibility in rural areas as compared to urban areas. This bias may mask pockets of relatively poor provision present in urban areas where relatively few branches are shared by a large local population.

To deal with this bias, the same data was also used to calculate supply density measures. A total of 791 branch outlets (both high street banks and building societies) existed in Wales in 2008, serving an estimated population (aged 16 or more) of 2,466,956. This equates to a national supply and demand ratio of 3.206 branches per 10,000 residents. By 2020, there were 532 branch outlets serving an estimated population of 2,575,922, equating to a national supply and demand ratio of 2.065 branches per 10,000 residents.

National levels of service provision give no insight, however, into local inequalities that can arise since both branches and population are unevenly distributed and connected to each other via a complex transport network. Local patterns can be explored by computing supply-demand ratios for smaller geographical regions and are useful in offering insight into areas of relative advantage or disadvantage.

Considering all branches, the Carmarthen West and South Pembrokeshire constituency reported the biggest decrease of more than 2.3 per 10,000 population. The northern constituencies of Clwyd South, Arfon and Dwyfor Meirionnydd all lost more than 1.5 branches per 10,000 population, as too did Cardiff Central in the south. Relatively high rates of decline were experienced in Montgomeryshire, Aberconwy, Clwyd West, Swansea West and Preseli Pembrokeshire, all losing more than one branch per 10,000 population.

Although useful, these traditional methodologies of distance to nearest provider and service density, suffer from several limitations. The report, therefore, goes on to utilise the enhanced two-step floating catchment area (E2SFCA) methodology to reveal the variability in access that may be experienced amongst residents living within a constituency boundary, and explore detailed spatial patterns and disparities in the rates of service decline across communities in Wales.

Taking this approach revealed that accessibility to banking services in Wales is often complex, particularly so in rural areas. Although the broad pattern of a significant decline in branch-led banking provision across rural Wales appears indisputable, at local level there are many more nuanced outcomes.

Finally, an illustration is given of how information representing a broader consideration of banking services than branch provision alone might be assembled and utilised. However, details regarding which factors to include and how best to integrate them requires greater consideration before this can be implemented in a meaningful manner, but nevertheless it demonstrates the potential power of spatial analysis for better understanding and managing service provision in the future.