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The mixed joys of ‘Unbanking'
If ever there were a time to broadcast the message that mutuality matters, it should be now. Three years on from the start of the global financial crisis, Britain’s mutuals have a golden opportunity to emphasise their difference to PLCs – but are they making the most of it, asks Andrew Stone?
As banking became a dirty word following the financial meltdown and government bail-outs, customers became ever more receptive to mutuals’ freedom from delivering returns to shareholders. Their roots in local communities and adherence to core values based on trust and mutual self-interest added to their appeal and safeguarded their reputations.
With the Coalition Government also expressing its faith in the idea of mutuality, these should, surely, be golden years. Yet the mutual sector has had a tough time, getting caught in the financial storm and failing to win market share.
Is this a sign mutuals have failed to get the “unbanking” message across in the way that US mutuals are doing rather more successfully? It’s not for want of trying and most mutuals have made great play of mutuality in their marketing, says Adrian Coles, director-general of the Building Societies Association.
“Just look at some of the advertising that has been undertaken recently. In its campaigns, the Yorkshire Building Society is emphasising it has no shareholders to keep sweet and how this leads to good value and no branch closures. The smaller ones make great play of location and the fact they know customers and their local communities better as a result. They can also offer a more personal service and offer face-to-face access to decision makers.”
A survey by the BSA demonstrates these messages are backed up by customer experience. “On eleven measures, including customer satisfaction, trust, value for money and willingness to help at a time of financial crisis, the perception of service was significantly greater than PLC banks,” says Adrian.
Mutual status need not just be associated with trust, security and personal service. It can also mean innovation and commercial nous, says Tracy Fletcher, head of corporate communication at the Skipton Building Society.
“We look at people’s evolving needs and try to meet them. For example, our goal-based My Savings account is for everything, whether saving towards a house deposit or funding a wedding. The idea is to help people save for what they want rather than getting into too much debt by paying on credit.”
Mutual status means being able to offer consistently good rates on a long-term basis rather than topping best-buy tables with short-lived deals, she adds. “We can return value to members with long-term, dependable, good-value saving rates. We’ve had more than 400 mentions in bestbuy tables last year.”
While mutual customers are happy with the products and services they are offered it’s not altogether clear if they appreciate that this might have anything to do with the difference between PLCs and mutuals, says Adrian Coles.
“The big question is: do they associate these levels of satisfaction with mutual status? Some customers will know what joining a mutual is about; being a member of a club rather than a profit maximising association. Having said that, for many others, looking at the corporate structure of the organisation they are doing business with is a bit much to ask. They simply want a good financial product and good service.”
But satisfaction does win new custom, often without the need to communicate the mutual message. Tracy Fletcher says the experience at the Skipton is that consistent value on financial products together with a strong ethos are powerful ways to win new customers through grass roots recommendations rather than through ad campaigns.
Adrian Coles agrees this is a strength of the sector. “There’s a greater trend to recommending to friends and family and it is being reflected by growth in the sector.”
The Coventry Building Society, for example, did much of the UK’s net new mortgage lending last year. The reason mutuals have not made greater headway, according to Adrian, is the distortions caused by the biggest offenders in the crisis being bailed out by government, which have in turn caused them to be seen as the safest places to invest or save with.
“Business conditions are tough and mutuals are not clawing new market share thanks to intense competition from taxpayer supported banks. The amount of support given to large banks is disproportionate. On the savings side the total amount of new household deposits across banks, building societies and mutuals was only £23bn. That market has shrunk, because interest rates are so low.”
The sad reality for mutuals is that there’s no easy solution until the distortions caused by the credit crunch disappear, adds Adrian. “It’s rather galling that those who failed are winning market share. It’s a matter of plugging away, telling people over and again that the mutual sector is on your side, that they are owned by and for their member customers and that they offer a better deal.”
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