Nobody disputes that the banking crisis has battered the reputation of the financial services industry but not all sectors have been equally tarnished. Building societies have escaped the opprobrium heaped on banks and at the recent BSA Annual Conference, they were even singled out by former chancellor Alistair Darling for special praise.
The sense among delegates was that there is a real opportunity for building societies to fill the void in public trust left by banks. Outgoing BSA chair Peter Griffiths challenged the sector to use this as the springboard to expand from. Thus far, however, they’ve struggled to capitalise, so what might a campaign to champion building societies look like?
The first issue to address is awareness. Do people really know the difference between banks, building societies or, more collectively, mutuals? Nationwide’s advertising campaign has been hugely successful in raising its profile but I’m certain that the majority of the public think it’s a bank.
Correcting this misperception matters because building societies have some great points of differentiation to leverage. The public – particularly young people – need to be educated about the role of a building society. What are their assets, why are they better places to save or draw mortgages from than banks? Put more starkly, why are they still relevant?
Arguably, building societies’ greatest reputational asset is the high satisfaction – and subsequent brand loyalty – of their customers. Savers at building societies and mutuals tend to be far more content than their peers at other financial institutions (as recent research by the Association of Financial Mutuals found) and indeed their ‘stickiness’ is so strong that generations of families stay with the same brand. Banks can only dream of being in this position.
The industry is faced with a fascinating communications challenge, with plenty of leverage points for a campaign. Here are the three main issues I’d be seeking to exploit/address:
- Turn the parochial image into a virtue. Building societies and mutuals have manifestly failed to keep up with consumer trends and the rapidly changing global market. A few years ago they were looking like anachronisms but today their narrow geographic outlook (and exposure) has its advantages. Most importantly, the vast majority avoided plunging into the toxic US mortgage market. They sit at the heart of the community and genuinely exist for their individual members.
- A haven of stability in an uncertain world. One of the key messages has to be that their business models – and the lack of dalliance in exotic debt instruments – are a bedrock of stability at a time of unprecedented uncertainty about the future. While banks have extended themselves far beyond their core function in the pursuit of eye—popping profits, building societies by contrast have kept it simple.
- Small is good. In the public’s eyes, banks have become far too big and powerful and as a consequence customer service has suffered. Small to mid-sized societies can play up their superior service levels and clear focus on the local consumer.
Chatting to journalists at the conference, I got a real sense that building societies have the makings of a great story. Personal finance writers keep telling me they want to hear more from them. The trouble is, that story is largely hidden from public view. The challenge for the industry and individual institutions alike is to speak up.