The big five banks closed 84​ branches and 249​ ATMs in one year, a report from KPMG​ shows.

Overall, the entire banking sector, including smaller banks like TSB and SBS, went from 934​ retail bank branches at the end of September 2019 to 850​, and from 2465​ ATMs to 2216​ at the end of September last year.

The branch closures, detailed in KPMG’s 2020 review of banks, have prompted concerns in Parliament and in May National MP Nicola Willis​ asked New Zealand Bankers' Association chief executive Roger Beaumont​ what the future of the bank branch was and if existing branches had a future at all.

But since KPMG gathered its branch and ATM statistics, another 77​ big bank branches have been closed, and about 50​ more ATMs have been decommissioned by the big five banks.

Beaumont said banks were grappling with Willis' question, but told MPs the change in behaviour was not driven by the banks but by customer demand.

“Customers prefer the convenience of online banking or banking on their app,” Beaumont told the Finance and Expenditure Select Committee​.

Voting with your feet

“Banks are simply responding to where customers are choosing to engage with them and how they’re choosing to transact,” Beaumont said.

“Less than 1 per cent of all transactions occur within a branch, and that figure is declining,” Beaumont said.

“I heard a story a couple of weeks ago from one of our major banks where one of their branches was averaging six transactions a week. That’s not six transactions an hour or six transactions a day. Six transactions a week.

“So if you translate that to a shoe store or a burger bar, you know, selling six items a week is just unsustainable,” he said.

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Beaumont said in the 12 months since the start of the Covid national lockdown 328,000​ more people had signed up for online banking.

The ones left behind

The May select committee hearing was held in response to concerns raised by National MP Andrew Bayly about branch closures, and the withdrawal of cheques.

Bayly, supported by Dyslexia Foundation and Grey Power, said about a million people, including many neuro-diverse people living with conditions like brain injuries and dyslexia, struggled with online banking.

Beaumont said banks were concerned about the “1 or 2 per cent of customers” finding the shift to digital banking difficult.

When Labour MP Ingrid Leary​ queried Beaumont’s estimate of the number of strugglers, he said it was backed up by an analysis of in-branch transactions.

Beaumont said banks were working with customers to help them transition to phone and online banking, and suggested community groups like Grey Power and Age Concern, as well as families of those who struggled, had a role to play in helping them bank digitally.

But MPs could decide to act, and Willis asked Beaumont how the committee could be confident that the small number of people were not being left behind by changes in the banking system.

“Is there a case for a Kiwishare-type obligation given the social infrastructure that you provide?”

The Telecom Kiwishare, which was abolished in 2011, guaranteed future owners of a privatised Telecom could not take the axe to free local calling.

The Reserve Bank said it did not have the power to require banks to keep branches open in order to keep their banking licences.

More banking access than ever before

Surveys by Federated Farmers​, and also Consumer NZ​, showed the public shared MPs’ concerns about branch closures, with farmers worried for the future of small rural towns.

John Kensington​, head of banking and finance at KPMG, said despite branch closures, banking had never been so accessible.

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“Yes, the number of physical branches has declined, but the number of substitute ‘branches’ people have access to has increased,” he said.

People could transact at any time on their devices, and generally only needed to speak to a banker in person when they had a problem, or to verify their identity. There were mobile mortgage managers too, he said.

Even identity verification was going virtual. Kiwibank spokeswoman Kara Tait said a pilot project at the state-owned bank to verify identities remotely was working for four out of five customers.

Thirty years of closures

Massey University​ banking expert Claire Matthews​ published a study on the effect of branch closures on small rural towns in the 1990s​, a decade in which 40 per cent of all bank branches shut.

Matthews found the impact on small towns was smaller than expected, with people compensating by switching to phone banking and eftpos.

“The impact of branch closures can be overstated,” she said.

“The 1990s saw substantial numbers of bank branch closures, with the number of bank branches in New Zealand falling from 1551​ as at 30 September 1993​ to 866​ as at the end of 1999​,” Matthews recorded in her 2000​ paper.

Matthews​ lives in the small town of Pahīatua​, near Palmerston North​, famous for the Tui Brewery on its outskirts, and has watched as every bank branch closed.

“The small towns around me all had bank branches. My own community was one of the last ones to have them, and in the last 12 to 18 months, we have lost the last of the branches,” she said.

There were still three ATMs in town, she said.

ATM deserts

KPMG’s figures showed the number of bank-owned ATMs had also been dropping.

Reserve Bank assistant governor Christian Hawkesby​ said in a speech in October: “This is particularly evident in rural communities on the West Coast of the South Island where there is only one bank ATM located between Wanaka and Hokitika – a distance of 418​ kilometres.”

Arnold, who takes tourists to see the rare white Kotuku​ herons in the Waitangiroto​ Nature Reserve, is based in Whataroa​, and he and his customers have gone virtually cashless.

“We are becoming a cashless society. If you are operating a business in this day and age, you have to take all forms of payment, but cash is the least common of the way people pay,” Arnold said.

His nearest cashpoint is a BNZ ATM in Franz Josef 30km away, but distance was not a bother for him.

“The next ATMs are in Hokitika, and that’s only another 100kms, and then there's Greymouth. There’s still bank branches there,” Arnold said.

Such trips are a fact of life in many rural towns.

Matthews did her banking online, but when she recently had to go into a branch to confirm her identity, she had to drive 30km to Palmerston North.

Just how many branches are left?

There were almost as many bank branches in September as there were in 1999.

As the urban population grew, branches were added, but in 2002 the launch of Kiwibank added several hundred more.

BNZ had 145 branches, down from 153 in September 2019. Its ATM count was down to 609 (including 382 deposit-capable “smart” ATMs), which was down from 657 in September 2019, and 639 in September 2020.

ANZ, the biggest bank, had fewer branches than most of its smaller rivals with 126 branches, down from 141 in September, but 36 only open part-time hours. It had 576 ATMs including 242 smart ATMs, up from 548 in September.

Kiwibank had 65 corporate branches. But counting its “service agents” located in host businesses for customers that prefer a face-to-face transactional banking option, the number of “branches” rose to 174, down from 193 in September. It had 222 ATMs (one more than in September) including smart ATMs.

Westpac had 123 full branches, and five help stations, down from 143 branches in September. It had 468 ATMs, including 166 Smart ATMs, down from 495 in September.

ASB announced 23 more branches would close, and put 13 on reduced hours, which left it with 86 branches in March.

Banking hubs

Though the big banks were still closing urban branches, they have agreed to hold off on rural branch closures for the rest of the year, until a banking “hub” trial has been completed.

 

Banking hubs were shared services provided by banks working together centred around a cluster of smart ATMs overseen by a bank worker to show people how to access the services they needed.

ASB, ANZ, BNZ, Kiwibank, TSB and Westpac customers could use the hubs to perform basic banking transactions, and there was a phone line for phone banking, if they need.

The hubs were being trialled in Twizel, South Canterbury; Nelson; Ōpunake​, Taranaki; and Martinborough​, Wairarapapa.

BNZ has two mobile branches touring small towns in Waikato and on the West Coast.

In January, small-town mayors from around the country called for providing banking services in rural areas to be part of the conditions of banks being allowed to do business.

Finance Minister Grant Robertson has encouraged banks to roll the hub model out nationwide to ensure access to banking services.