They say you learn something new every day and that was certainly true during my recent visit to America for the Building Societies Association’s (BSA) US Study tour.

I, along with some fellow building society directors and chief executive of the BSA, Robin Fieth, were fortunate enough to spend a few days stateside. We visited both Washington DC and Boston, meeting credit union executives, regulators and some of our mutual counterparts. 

While I may have returned home with a few extra pounds - thanks to those American food portions - I also brought back with me a fresh perspective on how we do things here in the UK, along with some new thinking on how we might further strengthen the UK mutual sector. 

World Credit Union Conference 

In Boston, a few of us attended the World Credit Union Conference (WCUC), which brought together around 2,500 delegates from 57 different countries. This was a fantastic opportunity to gain some insight into not only how America’s mutual sector operates, but also those of other countries.

The closest equivalent to building societies in America are community banks and credit unions. There are just over 4,500 credit unions in the USA, the largest one being the Navy Federal Credit Union - with assets of around $178 billion. They are not all that large however, with many managing only tens of thousands in assets. 

There are some distinct differences when it comes to credit unions and community banks. Credit unions are not only not-for-profit organisations but also tax exempt. They are owned and managed by their members and tend to cater to specific groups of borrowers, for example, if you are in the military - or have been - you are most likely eligible to join the Navy Federal Credit Union.

Community banks on the other hand are owned by shareholders - individuals or institutional investors – and cater to the banking needs of specific local communities or regions. Given the size of the USA, these needs can differ greatly between all of the different regions.

I spoke with a lady from a community bank in the Bronx for example, which as you might expect, has a very different client portfolio to a community bank in a more affluent area like Newport in New Hampshire - which we also visited. 

Another difference is that community banks and their products are very geographically specific, so a community bank in Washington for example, wouldn’t offer a mortgage to someone in California.

What we do have in common however is that just like building societies, community banks share the ethos of improving the lives of their members and helping those in their local community thrive. 

As well as the community banks and credit unions, you also have the big players like Bank of America, which operate across all states. 

One of the biggest differences to the UK however is that long-term fixed rates of around 25 years are the norm in the US. Because of this, they don’t benefit from the same intermediary model we have here in the UK. This doesn’t seem to be questioned however and there is a sense that this is the way things have always been done - so why change it now. The mortgage rates also tend to closely follow US interest rates, so they don’t vary dramatically from one state to another.

Amazed by Consumer Duty

If you’ve ever visited America, you’ll know that when it comes to customer service - especially in restaurants - they have it down to a fine art, and it’s evident this willingness to help also carries over into their financial services. 

However, when it comes to mortgage regulation, I have to say we’re miles ahead here in the UK. It blew their minds when a fellow mutual director explained the concept of Consumer Duty to a group of US delegates. Compared to their regulation, we’re ahead of the curve in areas such as consumer outcomes and product monitoring.

Regulation in the US works in a very different way to the UK, partly due to the sheer size of the country. You have state specific laws and regulations, and then federal laws that sit on top of that. It’s not like in the UK where the Financial Conduct Authority (FCA) oversees everything.

As you would expect, they also have their American way of doing things. I couldn't believe it when I heard that a board member at a community bank in the US could potentially be removed or asked to step down for gross misconduct if they suggest the bank floats on the stock exchange - can you imagine that in the UK!

Similar to the BSA, they also have their own trade bodies, such as the American Bankers Association and the Independent Community Bankers of America.

From a mutual perspective, what was particularly interesting was how community banks in the US engage with each other and share services. Here in the UK and with the help of the BSA, there’s a strong sense of community within the mutual sector, but we don’t perhaps share the Americans’ enthusiasm for sharing ideas. In the US, there is more of a culture of collaboration, with mutuals even going so far as to share back-office systems for example. Perhaps this willingness to share may in part come from not having to compete for business on a national level. 

There may potentially be more scope for collaboration here in the UK, which as mutuals we have not fully explored yet.

Virtual ATMs 

Another area of potential exploration is the use of Interactive Teller Machines (ITMs). While the US might be a few steps behind in regulation, they seem to be a few steps ahead of us when it comes to their use of technology. One interesting development is the introduction of ITMs, alongside or in place of Automated Teller Machines (ATMs). 

Some bank branches offer a mix of ITMs and real-life staff members, while others might offer a drive-thru virtual teller who can help customers with any inquiries they have while they also withdraw their money. With the right technology, this certainly seemed like a helpful innovation. 

Just like here in the UK, larger banks in the US are struggling with the closure of local branches, but they’re also finding ways to adapt and remain relevant within their communities. American bank Capital One for instance, offers the Capital One Café. 

It’s a novel idea - part coffee shop, part bank, and part office space. There was one close to our hotel in Boston. Open seven days a week, the space was not just for Capital One customers but for anyone who wanted to enjoy a coffee while accessing the free Wi-Fi, with someone on hand to discuss any financial queries. Capital One customers did however benefit from 50% off their coffee and were given access to bookable meeting rooms.

It certainly provided some food for thought regarding how we do things in the UK. Making banking more accessible and convenient is undoubtedly increasing and widening Capital One’s appeal to Generation Z - something we also need to be mindful of here in the UK.

Robin Fieth, Chief Executive of the Building Societies Association, said of the trip:

“The objectives of these trips are, firstly, to build and strengthen our relationships with our counterparts in the United States (and at the World Congress, globally); and secondly, to share experiences and learning through direct meeting and visits.  The over-arching theme this year was exploring the advantages and challenges of mutual holding company structures – essentially shared services holding companies which sit above a number of co-operative and community banks, providing economies of scale and ensuring that mutual bank brands remain sustainable, continuing to provide essential banking services to the communities they serve.  

“A secondary theme was Open Banking and the fear of IT businesses avoiding being regulated, leaving the burden for FS businesses. Meetings with US regulators also provide great insights into both the similarities and differences in supervisory approaches.  There was particular interest in the UK’s SMCR regime among both US regulators and practitioners.  Our robust corporate governance around board appointments felt like a definite plus for UK FS businesses”

Final thoughts..

For me, while there was plenty to take away from the visit, it was also reassuring to see how other countries operate, and there is much to be proud of regarding how the mutual sector functions here in the UK. 

Just like in the US, mutuals here, including ourselves, are continuously working to build genuine connections with our customers through innovative approaches - striving to be more than just financial institutions and instead becoming integral parts of the community.

The collaborative approach of US mutuals really reinforced the idea that there is strength in numbers, and this is definitely true for the mutual sector in the UK - whether that’s the strength of our own individual members or the collective strength of the mutual sector.

This article was first published in The Intermediary