The social agenda
The bank as local hero

The consumer-led spirit of the times, argues Mintel’s RICHARD COPE, is creating huge opportunities for banks to build new bridges in their localities.

Banks are working particularly hard to convince consumers they care, through everything from paperless statements to green mortgages. HSBC has offered ISAs that donate to worldwide vaccination schemes; while the Co-operative Bank signed up Bob Dylan to define itself as a bank “doing the right thing”.

But ethics alone aren’t enough. Consumers want simple propositions – and proof that institutions are doing much more than just talking about ways of correcting the uniformly negative image bequeathed by the global financial crisis. And the truth is that there’s huge potential for banks to become genuine “local heroes”.

So far they’ve sought to overturn their image by communicating a cosy localism – the “corner shop banking” of NatWest, or MasterCard Big Lunch summer street fêtes are great examples. But there’s scope for more banks to do good work on behalf of consumers.

At Mintel, we talk about this spirit of “doing the right thing” for consumers, and our Moral Brands research shows this is increasingly expected of companies. But it also demonstrates an odd paradox: while half the UK population views environmental and ethical issues as important, they’re reluctant to take action themselves. Most, let’s be frank, are too lazy or cynical to act on their beliefs.

On the other hand, given a choice, people will indeed opt for the ethical brand. This is why corporate social responsibility is being extended and offered to the consumer as a differentiator, a deal breaker across many sectors. We’ve seen IKEA working with UNICEF to help eliminate child labour in the cotton industry in India, as well as organising immunisation efforts. Tesco has a self-imposed deadline of being carbon neutral by 2050, after opening its first zero carbon store in Cambridgeshire last year.

Charitable action works best

An ethical bank might look to retail for inspiration. Charitable action works best, for example, in the post-recession retail language of coupons and 2 for 1: the “buy one get one free” (BOGOF) culture has been simply replicated as the appealing notion of “buy one get one free”. Procter & Gamble buys one tetanus vaccination in the Congo for each pack of Pampers sold. For every pair of glasses Warby Parker sells, it donates another to the charity Restoring Vision. In the US, Tom’s Shoes promises that for every pair you purchase, they’ll give a pair of new shoes to a child in need.

Progressive financial brands can offer something similarly tangible: Bank of America’s “keep the change” programme rounds purchases up to the nearest dollar and deposits the change in a savings account. This could be applied to charity donations on purchases, so the bank takes care of the legwork.

Banks might also achieve distinction by tapping into the aspirational green trend associated with high-end style leadership – something we call “Eco and Ego”: the idea of “going green to be seen” is rooted in the Prius and Anya Hindmarch’s “This is not a plastic bag” concept.

Today, that same idea is being expressed through Philippe Starck designed tapwater bottles; the chic, futuristic Treehotels in Sweden; the “renewable energy city” and tourist attraction of Masdar in the Emirates; and the hip rooftop gardening clubs of Queens, New York

For banks, this suggests a potential for heavily branded credit cards that double as “green cards” or “donor cards” – advertising and contributing towards ethical causes at the same time. Taking a lead from MasterCard BigLunch venture, there’s also promise in sponsoring and co-ordinating community regeneration or gardening projects.

How can a bank become a local hero? For many, financial services represent a corporate old guard at odds with the spirit of new independence nurtured by the Internet and necessitated by recession. Progressive companies need to address the needs of a newly independent workforce and counter the rise of crowd funding which threatens to relegate banks to the ranks of dispensable “middle men”.

Another influence is the changing workforce. Recession, redundancy and the prohibitive costs of education are all contributing to a decline in office working.

• the Office for National Statistics says self-employment in the UK grew by 112,000 in Q3 2010 to reach a record 4.03 million.
• the Federation of Small Businesses estimates that 300,000 more people turned to self-employment during 2010.

This new spirit of independence affords banks an opportunity to support new businesses, but they face competition from consumers themselves. The communityowned business model is nothing new, but communities are now moving beyond peer-to-peer lending into actual stakeholding, where individuals no longer rely on an institution (a bank, a record company) to fund their endeavours.

This poses a threat to banks – especially from sites like zopa.com (see p34) that turn to peers as investors and supporters. Mintel’s research shows that peer-to-peer lending schemes contributed to a 36 per cent decline in the UK’s personal loans market through 2009.

Crowd funding is taking many forms, from supermarkets to football teams. We’ve seen a members only, members-funded People’s Supermarket in London; while in Manchester, there’s FC United, a member-owned alternative to Manchester United, where shareholders are invited to help build their own stadium.

How can banks win back trust and custom at a local level? They might become “third parties” to guard and administer funds – rather than actually provide them as loans. However, it’s better to use crowd funding as a wake-up call and win the trust of the wider entrepreneurial new business start-ups that require traditional business loans.

What does this mean for finance?

This speaks to a need for localism as an alternative to massmarket globalisation and homogenisation. Rather than be “third parties”, banks can be “third places” – sounding boards, resources, places to meet, rallying and staging points for the local community. It’s one thing, like Metro Bank, to welcome customers with free biscuits for their pooch, but banking venues and sponsorships can do much more to reconnect with local communities and businesses.

Inspiration and subversion of the status quo can come from various sectors. In the Czech Republic, news publisher PPF Media has launched Nase Adresa (Our Address), a chain of cafés that function both as newsrooms for its journalists and cafés for the general public. Seattle’s Sorrento Hotel offers locals educational extracurriculars.

What does this mean for finance? One opportunity is to follow the Czech example and meet your customers halfway – on the comfortable, neutral ground of the pub, the park, the café or even the customer’s home. Or banks might use their properties and physical spaces (or sponsor the use of others) to connect with the community.

Jyske Bank in Denmark (see June-July 2011 issue) isalready part of the way there, having given its branches a makeover, creating a café feel with comfortable furniture, video screens and espresso machines. The next step is for these “third places” to extend their hours and roles – it’s been suggested to traditional café chains – to play community roles and become night schools or entertainment venues after hours.

Can banks ever be “social”, as meeting places, either during business time or after hours? Could banks reconnect at street level, win community trust and, crucially, the custom of local businesses and entrepreneurs? No sector is distinct or isolated. They all share the same target consumer group. Inspiration can be drawn and lessons learned by looking at what’s happening elsewhere.

RICHARD COPE is Principal Trends Analyst of the market intelligence and research specialist, Mintel.

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