Bank to the Future!
Clare Lavender, bank manager at Handelsbanken in Bristol, recently returned from her summer holiday to find things busier than ever. Her branch, in the Clifton area of the city, is one of 134 outposts of the Sweden-based bank now firmly established in the British high street.
“Things are very different these days,” she says. “The phrase ‘lack of service’ is one we’re hearing a lot when people describe their current bank. Certainly more people are coming through the doors looking for a change and we are looking to make the most of that opportunity. But we choose customers carefully as well as them choosing us.”
Caution is part of Handelsbanken’s business model. It boasts an old-fashioned approach to local banking (though its managers prefer the term “traditional”). Based on the ‘church spire’ principle, branch managers make all the key decisions and try to maintain direct relationships with all their customers.
“I might not know about a particular community in the north of England, but I do know what’s happening here locally,” says Lavender. “If a customer mentions a property, a street, then we know it, we can visualise it. It’s fair to say we operate in a traditional way – we look after customers in a way some of them might be familiar with from years gone by. Stability is a key word for them, because they suffer a lack of continuity with other banks.”
Handelsbanken UK, which saw profits jump 146 per cent in the first quarter of the year, is one of a handful of smaller ‘challenger’ banks looking to break the stranglehold of the big five – Barclays, RBS, Lloyds TSB, HSBC and Santander.
Faith in these behemoths, shaky since the financial collapse, has been obliterated by a summer of scandal. The Barclays Libor-fixing revelations and the scale of mis-selling of payment protection insurance, involving all the big five, followed the RBS/NatWest IT disaster (the biggest computer problem ever incurred by a UK bank).
The erosion of trust has been much more direct, much closer to home than the general fear and confusion most of us have felt about the great global financial casino since 2008. One July YouGov poll showed 60 per cent of people are losing faith in their own bank. Forty-nine per cent believe the high-street banks to be dishonest, while 45 per cent think of them as incompetent.
James Robertson, a 30-year-old business manager at a non-profit organisation in Glasgow, recently closed his accounts with NatWest and moved his money to online and telephone banking specialist First Direct. “IT cock-ups do happen, of course, but banks really have to make themselves immune. If they can’t get their IT right, what else is going wrong?
"My fiancée and I are planning our wedding and we didn’t like the idea of Santander taking over NatWest in Scotland and all the hassle that might entail. It’s been amazingly easy to switch to somewhere I feel like I’m in control of my money. It took 45 minutes to sort out, then I sat back and watched it all happen.”
He is not the only one. Campaign groups are confident a quiet revolution is taking place under the radar, as more and more Brits break with life-long habits and move their money to smaller, more ethical or transparent subst-itutes than the high street’s big five. It used to be said you were more likely to get divorced than switch banks, but something significant appears to have happened in the first few weeks of July, when the banks dominated the pre-Olympic headlines.
Gloomy, passive resignation turned to defiance. The Building Societies Association noted a “30 per cent rise in consumer interest” during the first week in July following the Libor story. Norwich and Peterborough Building Society reported that interest in their gold current account rose by 40 per cent. Robin Taylor, head of banking at The Co-operative Bank, told The Big Issue: “We’ve seen a 66 per cent increase in applications to switch to us in the past six weeks.”
Many hope the spike is part of an ongoing trend. The Charity Bank has reported a 200 per cent increase in new customers during the first six months of 2012. Campaign group Move Your Money estimates that, in all, 500,000 people in the UK have switched their current account to smaller banks and building society mutuals since the start of the year.
Louis Brooke, Move Your Money spokesman, describes the estimate as “conservative”. He said: “It’s a loss of faith, both on bigger picture issues like bonuses and on a basic level – whether [the big banks] are the right people to look after your money. There isn’t enough appetite for structural change among politicians, the regulators, or within the sector itself, so we would encourage people to look at the alternatives out there that are already working. The reality is that the big banks are falling behind. Change is inevitable.”
Julia Craik (pictured above), managing director at The Premises recording studios in Hackney, was on holiday when the Barclays Libor scandal broke. “I got so angry listening to the details, I was shouting at the radio. I thought – I’m giving these people our money, what the hell am I doing?
"I had a meeting with our directors and I asked whether anyone would be up for moving our bank account. Everyone agreed it was a good idea. People have been feeling so disempowered, but if enough people feel the same way about doing something, we can hurt the big banks and force change in the financial sector. It’s an ethical decision, but it’s been a very good business decision too, because we’ve been able to say to our clients, ‘We can guarantee your money is being well looked after by the good guys.’”
Craik moved The Premises’ money from Barclays to Triodos, a bank that prides itself on lending to businesses and charities judged to be of social or ecological benefit. “We have been on a growth trajectory anyway, but perhaps on the back of the concern with the Libor issues, we saw our largest ever net growth in new personal customer numbers in July,” says Huw Davies, Triodos’ head of personal banking.
“Historically there has been a perception that big equals stable, but we feel what has happened in recent years has made clear why a lot of banking is inherently unstable. It’s not necessarily about big versus small, it’s about the way you do business.”
Dave Fishwick would concur. The mini-bus mogul got so fed-up with banks last year he tried to set up his own (a process captured in recent Channel 4 series Bank of Dave). His Burnley Savings and Loans is still going strong, lending an average of £25,000 a week, ploughing all profit into charitable enterprise.
“Every single person we lent to paid us back, and we realised the problem wasn’t with the great British public, the problem lay at the door of the banks,” says Dave. “The banks want you to think this is all too complex to understand, so we’ve taken it back to basics to show what’s possible. I would like to see a community bank in every community in the country.”
Supermarkets and Richard Branson’s Virgin Money have pledged to add more competition in retail banking, and the government has promised to make it easier to switch accounts. Yet Tony Greenham, head of finance and business at the New Economics Foundation, sounds a note of caution. At the end of last year the big five commanded 83 per cent of the personal current account market, and he doesn’t believe that figure will be greatly different at the end of 2012.
“The entrenched position of the big banks is still so powerful – we need major reform from government to allow the alternatives to flourish,” says Greenham. “Even having eight large-sized banks is slightly better than four or five but it doesn’t really get us near the diverse financial system we need. In countries like Germany and Switzerland local banks were able to carry on lending when credit from bigger banks seized up.
“We need a much bigger building society sector and a much better credit union sector, properly local banks and banks with expertise in specific industry sectors. We still have a largely mono-cultural banking sector. So there’s a long way to go.”
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