Mutuals offer great customer service…. and more

BSA comments on Metro Bank launch

The arrival of Metro Bank on the high street has caused a stir this week.   With promises of “unparalleled customer service” will this really change the face of the high street and are there better alternatives out there already?

Whilst time will tell if Metro Bank can live up to its promises, local building societies on high streets throughout the UK have been delivering quality service and market leading products for many, many years.

Independent research from GfK NOP shows that mutuals outperform their banking counterparts on various aspects of customer service, including treating customers fairly, value for money and being trusted to give good advice.

The research shows savers and borrowers with mutual financial providers are more satisfied than customers of other financial providers. 70% of mutual mortgage customers were extremely or very satisfied, compared to 63% of borrowers with other institutions. 59% of savers with mutuals were extremely or very satisfied, compared to 47% of savers with other institutions.

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What does the saving ratio mean for building societies?

Over the last few quarters the personal sector saving ratio has risen sharply, from -0.9% in the first quarter of 2008 to the latest figure of 6.9% in the first quarter of 2010.  Building societies (and many banks) are savings based institutions and it might be felt that “more savings” would be good for the sector. 

In fact this is to misunderstand the meaning of this particular economic indicator.  The saving ratio is a net figure – that is it represents gross saving minus borrowing.  If personal sector gross saving, for example, goes down, but borrowing goes down even further, the saving ratio will go up.  This occurs even though, in this example, what most people would regard as “saving” has fallen.

Similarly, the years in the middle part of the last decade experienced a low saving ratio, even though deposit flows (which are just one form of saving) were much higher than they have been more recently.  Of course, the higher level of gross saving was offset in the saving ratio calculation by much higher levels of borrowing

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Lost accounts - where are we now?

The Prime Minister’s launch of The Big Society has put dormant - or “lost” - accounts back into the spotlight. David Cameron proposes the creation of a Big Society Bank to help finance social enterprises, charities and voluntary groups. This will be financed by dormant bank and building society account money, alongside private sector investment.

Out of the media spotlight, a lot of work has been going on behind the scenes by building societies to reunite as many of their lost savers as possible with their money. In 2008 and 2009, societies’ efforts reunited members with around 92,000 accounts, representing £47 million. It is estimated that around £115 million is still currently held in building society lost accounts. This is on a definition of 15 years or more of no customer-initiated activity.

The next step is for a reclaim fund to be established to enable the money in lost accounts to be transferred to the Big Society Bank. The Co-operative Financial Services has agreed to set this up and it is envisaged it will be up and running by the end of 2010, with the first funds being distributed to the Big Society Bank early in 2011.

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BSA director general scoops award

Adrian Coles, the BSA’s Director-General, has been awarded the Individual Contribution Award at the Trade Association Forum (TAF) Best Practice Awards 2010 hosted by Nick Hewer of the BBC's The Apprentice.

These awards recognise and celebrate the achievements of trade associations and individuals within them across the UK. 

The judges said of Adrian:

“Adrian’s dedication to preserving the principle of mutual organisations has seen him recognised nationally and internationally by other sectors where mutuals and cooperatives operate and he has been instrumental in bringing these sectors together to advocate and promote their position in a co-ordinated manner.

Widely recognised as both an expert within the building society sector by both the media and the Government, he has been able to guide his sector through particularly challenging circumstances and help ensure that the principle of mutual organisations continues.”

The BSA has now won awards at three of the last four TAF Best Practice Awards.

BSA welcomes iRed Parnership as Associate

iRed Partnership, a wholly owned subsidiary of the Royal Mail Group, has joined the BSA as an Associate.

iRed is revolutionising paper-based communication by digitising the correspondence chain, to bring you and your customers closer together.  To discover more about iRed Partnership, and to learn more about how digital document management can provide real benefits and potentially significant cost reductions, visit their website- www.iredpartnership.com