Banks close branches as online finance booms

The Internet has continued its assault on the finance industry this week with the news that both Barclays Bank and Northern Rock are to close branches in response to the growth in online services.

It has emerged that Barclays is to close up to 200 of its 1,900 branches in a cost cutting move saving £200m a year. Barclays has not yet decided which branches face the axe or how many jobs will be lost.

The branch closures, which will come into effect early next year, are part of a continuing strategy which has seen Barclays taking half a million Internet customers, a figure that is rising by 5,000 a week. Peter Duffy, head of online banking for Barclays, said: "Our network has to change to reflect the different ways our customers actually want to deal with us today."

Northern Rock is also to close 29 of its branches, while announcing plans for extending its ecommerce activities. It denied, however, that it was planning to become a fully-fledged Internet bank.

The company insisted jobs would be created by the move - with 300 people being taken on at its Newcastle headquarters and a new call centre opening in Sunderland.

Adam Hill, senior business analyst at Datamonitor, said that the moves did reflect a shift in consumer interaction with their banks. He said: "There is no doubt that Internet banking has taken off in the last year. But the branch network still has a place and will continue to do so in the years to come."

David Bradshaw, principal consultant at Ovum, agreed, saying that despite the high-street banks' continuing wastage of small branches, the Internet still had a long way to go before it eclipsed the call centre or the branch network. "Now the customer wants to deal over a chosen channel - such as the phone or the Internet - and banks need to have a strategy for unifying channels and to be versatile enough to cope."