Taking a co-operative approach to post-pandemic banking

Mark Hooper is leading on the development of a co-operatively owned, community bank for Wales. He tells us a bit about where they are with Banc Cambria, how Covid19 has changed things and where they go next.

See this page in: Cymraeg

We started working on Banc Cambria ‘BC’ (before-Covid19) and it felt quite different. The Welsh financial landscape was clear; the big banks were continuing their retreat from our towns, villages and city suburbs; the same banks were being criticised for corporate failings in this, shortcomings in that. We knew that many people had little choice but to stick with the bank they had, as frankly, all the major institutions were simply more of the same. The market, we were told, was being disrupted by the ‘Challenger Banks’, but our conversations told us they were failing to challenge the things people really cared about; greed, reduced service provision and a complete disregard for the smallest of businesses. None of them really get the Welsh language; the right for customers to bank in the language they choose, not the one chosen for them. We felt our model had an edge – a straight-forward offering, delivering for its members, not shareholders.

The Senedd’s Enterprise, Infrastructure and Skills Committee had written an excellent report into ‘Access to Banking’ that brought the issues clearly into a Welsh focus. They crunched the figures and honed the problem – they called on Welsh Government to act.

We had data. Lots of data. Data on Wales’ smallest businesses, information about spending patterns. We even had usage figures on cash. We had a big map installed, with stickers telling us where the banks were and more showing where they used to be. We had even started placing pins in towns where we wanted to be; we even visited some. Bigger towns like Buckley in the north east, which used to have a bank on every corner but now has none. Smaller towns like Knighton, where locals told us they had to travel 40 mins each way to get to the nearest bank.

We had attracted some experienced ex-big-bank executives to our Board and Project teams and organisations who offered practical solutions to help us to market quicker. The support package provided by the Community Savings Bank Association (CSBA) would help us reduce time, reduce risks and reduce the costs associated with a banking application, but it wouldn’t stop the process being lengthy, risky and expensive.

We knew this was going to be tough, but we were up for the challenge. We felt we had a solution – like others who were embarking on such similar journeys from elsewhere in the UK (there were eleven groups in various stages of development, two on the other side of the Severn Bridge, who had actually begun their journey to regulation). Think tanks were calling for co-operatively owned community banks to be included in Party manifestos for the General Election in December. We felt we had some momentum behind us all. We were wary of using the term ‘movement’; at least outwardly 😉.

Then we, like everyone else, were confronted by a health pandemic and ensuing economic shock that threw a great big spanner in the works (or more accurately our forecasted spreadsheets) – what a calamity – or so we thought. Welcome to our world of now; most definitely, work-in-progress.

Once we’d got over the initial panic upon realising the datasets we had been developing were looking distinctly chocolate tea-pot like, we were able to take stock, and taking advantage of the lockdown, took some time to recalibrate Banc Cambria to a PC (post-Covid19) world.

First positive, we’ve not launched. Our reality isn’t the reality of the others – we were fortunate in this regard. If the Office for Budgetary Responsibility impact assessment proves in any way to be accurate, the effect on the UK’s existing financial services sector will be dramatic. Even if there was a V-shaped recovery, there won’t be a direct correlation between those going down the downward slope and those who emerge the other side – those losses will be taken by the existing providers.

Secondly, whatever the landscape looks like at the end of this, one certainty is that we’ll all need bank accounts. The concerns people had about big banks still exist; in fact, those concerns could be further exacerbated by the way they handle things over the coming months – none of which will be easy. Will they deal compassionately with loan defaults, mortgage distress and incomplete business plans? Will they take the opportunity to further consolidate their branch network, reduce the availability of ATMs, or withdraw popular products from their portfolio that provide insufficient (comparative) returns? The banks haven’t started well.

The big banks make a lot of money from our collective financial lives. One figure (one of the big banks use internally) suggests that they make an average of £400 per annum, per active current account. That’s not jiggery-pokery, it’s the margin they make on your loan, the fees from your ISA, or the interest charges on your overdraft PLUS the uses they put your cash to when you’re not needing it (lending to whoever they choose, for whatever purpose they think will make them money). If we assume there are 2.5M active personal current accounts in Wales; that means c. £1BN per annum leaves the Welsh economy into the arms of the shareholders of the big banks. A post-Covid19 Wales will need to find ways to keep its money for as long as possible – the circulation of cash being vital to the economic well-being of our communities.

From the outset, a key difference in Banc Cambria’s business model related to the provision of a Wales-wide branch network. Initial evidence seems to suggest the Covid19 crisis is likely to hit high streets disproportionately hard. Wales’ retailers were suffering before the pandemic and things are harder still now. The emergence of a new bank onto high streets across Wales will act as a stimulus to the wider retail offering, portraying confidence, community by community.

One of the key opportunities the lockdown affords us is the time and space to see how banking operations have worked (or not) in a locked-down world. We will benefit from looking, listening and learning, particularly over the first few months and ensuring our retail offer can cope with uncertainties and fast-moving legislative changes. We could be the first Covid-responsive retail banking operation – one that has been designed to deal effectively with lockdowns, social-distancing and changes in the relative importance of cash in the everyday mix.

We know that it takes life events for people to choose a new current account provider. Ordinarily that tends to be going to university, getting married, getting your first mortgage, getting divorced, then remarried, perhaps. The post-Covid19 world could be one of those life events, but for all of us. Banking is a vital part of everyday life that we can control – other countries have a strong co-operative banking cohort; no reason we can’t have the same.

Finally, the issue that seems even more critical in a post-Covid19 world relates to the timeliness of the launch of Banc Cambria. We want to be able to launch into the start of the post-Covid19 recovery; to catch the first wave and encourage others to join us. Whilst recognising that establishing a bank takes time, rest assured being alongside Welsh people and Welsh businesses when they need that help to re-emerge is our No. 1 priority. We are on the case.

This blog is published as part of a series for Co-operatives Fortnight 2020. Let’s build something better together. #KeepCooperating

 

Mark Hooper

 

“We could be the first Covid-responsive retail banking operation – one that has been designed to deal effectively with lockdowns, social-distancing and changes in the relative importance of cash in the everyday mix.”

In case you missed it..

Read more of our #KeepCooperating blogs for Co-operatives Fortnight 2020