Pilot was not a test of ‘shared banking’ but was an adaptation of existing, unpublicised, inter-bank agency arrangements (IBAAs) in 10, exclusively rural, sites. True branch sharing formats were not piloted.

A relatively low level of usage had been predicted by CCBS as the particular rural sites selected by the banks were unrepresentative for an assessment of national demand for branch sharing. The overall results largely confirm that prediction but conceal positive indicators.

The totals and averages across this particular sample, used by the banks to evidence low demand for branch sharing are not helpful to future decisions on shared banking potential so this analysis looks to the individual sites for potentially more useful indicators, and discovers many.

The independent evaluator stated “the evaluation can only assess the service that was established (by the banks themselves unilaterally) not what might have been if the choice of sites had been different.” She also concluded that it is hard to extrapolate from these sites to other types of location, such as urban or inner city.

The key ingredients for a successful shared banking scheme have been identified in the past by CCBS as:

The importance of these factors was confirmed in the independent report and this analysis examines the outcomes of each site against these key criteria.

meet the critical mass criteria but are historically “one bank monopolies” in areas of regional dominance by the bank concerned: in each case the bank’s presence is substantial in relation to the size of the market. Accordingly there are very modest pools of ‘branch dependent’ customers of the other banks, further reduced by those who find other towns more convenient for banking because of work or business journeys. The pilot scheme’s take-up percentages in those locations, relative to others, confirm the situation.

The communities which are nearest to meeting CCBS’s criteria for a successful shared branch service, and also performed amongst the best in the agency pilot, are:

The performance of the first two are influenced by the convenience gain (distance to alternative banks) factor and the latter two by the multi-banked pool factor but elements of all 3 criteria are present in each.

It should be emphasised that those locations would not have been chosen by CCBS to pilot a shared branch scheme as they too are small and historically one bank monopolies or one bank dominant, but they have sufficient of the ingredients to provide modest indicators.

	Personal Visits(weekly)	Business Visits(weekly)	Business VisitsADJUSTED	Businesses which registered for use
DONINGTON Lincs	2190(42)*	212(4)*	394(8)*	35*
LYNTONN Devon	1216(23)	526(10)	973(19)	26
ROSSETTN Wales	2683(52)	329(6)	612(12)	39
LENHAM Kent	4733(91)	758(15)	1410(27)	72
Average of other 6	1625(31)	199(4)	371(7)	25

The independent report identifies a level of latent demand that was ‘put off’ by the pilot’s communication and administration shortcomings which had the most impact on the business demand. The column in italics above reflects this and also adjusts for the effect on usage in Quarter 1 of a lengthy pre-use registration process for business users.

Take-up as a % of mailings is irrelevant as the banks have been unable to relate usage to eligible branch dependent/branch using bank customers within the respective catchment areas or even, despite formulae being proposed by CCBS, make market share adjusted comparisons with the branch using behaviour of the host bank’s (not just host branch’s) customer base in the areas concerned.

A footfall increase of 5% for the pilot as a whole is quoted, unsupported, in the independent report which states “there were large variations in the levels of use across the ten pilot sites.” Applying a weighting based on branch size and hours of opening CCBS has estimated the average footfall increase for the four highlighted sites at more than double that and adjusted usage a promising c 15%

It has to be remembered that all four highlighted sites are very small and, historically, one bank dominant. CCBS would have preferred much larger and more multi-banked communities.

LENHAM and ROSSETT, however, have some dormitory/suburban characteristics relative to nearby towns and cities including a turnover of population banking with other banks. In tourist LYNTON businesses change hands bringing in new owners in account with and/or financed by other banks.

DONINGTON (20 mile return journey) and LYNTON (28 mile return journey) are very remote from alternative banking locations.

DONINGTON and LENHAM are “limited hours” branches which restricts the convenience factor significantly and higher usage would have been expected if the branches had been available full banking hours.

LYNTON is a seasonal holiday resort and therefore annual figures understate demand.

Until the last stages of the pilot scheme *DONINGTON was also serviced by an HSBC mobile bank, the cessation of which “fuelled an end of year influx of customers who had previously used the mobile to the Lloyds TSB pilot.” The year 2002 HSBC mobile usage figures for DONINGTON (not available to CCBS) should be added to those recorded above to give a true picture of demand.

The independent report claimed “the pilots have attracted a number of people who had previously used agency facilities at the post office” [The Post Office itself claimed a “significant fall”] and the BBA chose to highlight this in its press release despite the independent report survey showing the “overlap in use was not great.”

However, although not great, it is significant that given the option of using a bank (even though not their own) there is a preference for it over the post office. This confirms earlier research for the BBA (January 2000) which afforded post offices very low “first choice” ratings compared to the prospect of shared bank branches.

Upon discontinuance of the pilot scheme in these 10 small locations, the 258 small business users will be offered the opportunity to continue using the competitor branches via the inter bank agency scheme (IBAA).

All small business users expressed themselves as satisfied, 67% “very satisfied”, with the use made of the pilot scheme and yet none had previously availed themselves of the IBAA scheme had they even been made aware of it.

Despite this evidence of a potentially substantial latent demand nationally for IBAAs, the concurrent report for the OFT by IBM on behalf of the banks claims little interest and offers only the most modest of improvements in process and awareness raising activity. CCBS has drawn this latest information to the attention of the OFT.

Conclusions
Although disproportionate to the inter-bank time devoted to this ill-advised pilot scheme, the following potentially useful conclusions can be drawn to assist in the planning of a more innovative range of pilots in locations with more potential.

communities of sufficient size and critical mass of other services to retain and attract footfall

a ‘multi-banked’ small business and personal population of branch using customers

Where all 3 ingredients were present in this agency pilot, although limited by the size and nature of the exclusively rural sites selected by the banks, the indicators for a successful branch sharing scheme were strong.

[There were no substantial multi-banked population sites in the pilot and distance, per se, e.g. Cerrigydrudion 20 miles, did not produce results.]

Size of locally employed and retired population and the scale of retail activity are important to viability; therefore suburban and inner city communities are likely to produce as many opportunities as larger previously multi-banked rural sites: in previous research for the BBA urban sites produced a higher level of difficulty for those visiting branches. There is the need for full banking hours 5 day opening.
[A shared banking concept (although subsidised in such cases) may be the only way to retain a banking presence in the smaller locations, and establish new ones in new/growing communities, rural and urban.]

A substantial latent demand from small businesses exists for inter-bank agency use of competitor bank branches if more convenient, despite banking industry claims to the contrary. This service would have special relevance to locations where market dominance precludes shared branches as in the first four examples on page 1.

Confirmation that post offices are not the preferred choice of banking point when a shared banking alternative is available.

The independent evaluator states that a further pilot would be necessary to ascertain demand and viability in suburban and inner city areas.