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Community banking

I remember researching credit unions during a university project in my second year of university in 2005. I was impressed by the ethical notion that many of these community organisations held. For those of you who do not know what a credit union is, I found a nice definition here. Basically they are managed and governed by the community that they serve. This is similar to co-operatives, and it is a business structure and ethic that we may see more of over the coming years.

Over the last several decades the public perception of banking has dwindled to a point where you can’t spend an evening at the pub without someone f’ing and blinding about those bloody bankers!! They were once a well respected pillar of the society- they would know more about your business than you did, they were the go-to person to give advice and support, and if they saw a good investment they would do their utmost to help you out.

As the years have gone on large institutions have moved away from a personalised service in the chase for high profits. Banking has been commoditised. As the large institutions have reigned supreme, the number of customers dissatisfied with their banks has increased significantly. Small businesses have felt the brunt of impersonal service and growth in the SME sector has become stifled. In addition, the nepotism and elitist culture which is rife within the banking hierarchy has got to a point where the void between the boardroom and customer has become so large, there doesn’t appear to be any way back.

Bob Diamond

Bob Diamond – source: the Telegraph

Recently, I’ve been watching a new tv series called Bank of Dave, about a self-made entrepreneur from Burnley, England. Dave set up his own bank in a direct assault on the Goliath high-street banking industry. After nearly a year of planning and overcoming a number of significant obstacles, including the FSA deeming themselves too snobbish to even talk to Dave about his idea, he finally opened his doors to paying customers. Dave began by offering 5% interest on savings (about 4.5% higher than his competitors) and used his personable, positive and friendly manner to attract custom – obviously helped by the press and tv coverage.

Dave is making waves in an industry that has accepted the high-street banks as the norm for way too long. Dave sticks his finger up (literally) at the banks. He listened to the locals in his area and after hearing their concerns and thoughts on the industry, he has offered a service which aims to meet those needs – they want the ‘bank manager’ back.

Dave highlights a grave concern of the UK public; that the banks are in it for themselves. However, recently the Co-operative has taken over around 400 Lloyds TSB branches, a sign that the community orientated organisations are moving up the ladder again. If customer perception of the high-street banks gets worse, which is quite likely, are we going to see more accounts shift back to co-operative’s, credit unions, and financial institutions that offer a more community focus?

Andi

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