Traditional banks are lobbying for fintechs to fund new UK community banking hubs designed to replace high street branches, despite neobanks operating without offering customers in-person services of their own. Larger lenders are demanding that challenger banks share the costs of establishing banking hubs set up to mitigate the impact of years of branch closures, according to five people familiar with the deliberations. Banking hubs enable consumers using large banks and building societies to carry out cash transactions.

They are funded by banks and often provided through the Post Office. The banks’ proposals would force newer operators such as Revolut, Monzo, Chase and Starling, which have no branches and instead operate via mobile phone apps, to fund high street hubs serving customers of traditional lenders such as Barclays and Nat West. Fintech trade association Innovate Finance said any suggestion that digital banks should be required to pay for in-person banking hubs was “concerning.” “We see this ultimately as being essentially a retrograde step in terms of retail banking competition which will have a negative impact on competition and would ultimately lead to poor outcomes for consumers,” said Janine Hirt, chief executive of Innovate Finance.

The dispute between traditional high street lenders and fintechs comes as Richard Lloyd prepares to deliver the conclusions of his Access to Banking Services review to the Treasury next month. The review will examine how hundreds of branch closures have affected consumers and what measures may be needed to support vulnerable and elderly customers who wish to use in-person banking services. Its recommendations are likely to be incorporated into the financial services bill, which is being debated in parliament.

British banks have shut more than one in three of their UK branches over the past five years, data from the Office for National Statistics shows. Last year, the UK’s Financial Conduct Authority said banks and building societies must assess local cash access and provide alternative cash services where gaps in the network are identified. In response, the sector established banking hubs, which allow customers of major banks and building societies to carry out cash transactions.

Banks have agreed to set up 350 such hubs by 2029. Traditional banks have argued that digital banks should share these costs of in-person services as they piggyback on these, such as when their customers withdraw or deposit cash. One neobank executive said: “We are not the ones who have been closing branches and yet are now being asked to contribute so that rival customers can access their services.” The executive added: “If they were to succeed this could be quite a costly bill for challengers who could not use these banking hubs at all.

We feel the big banks are seizing an opportunity here to try and shift some of their cost base elsewhere.