SOCIETY Matters

No. 33 | Autumn 2014 SOCIETY matters

FOR SALE HOUSING BUBBLE HELP TO BUY PRICED OUT RENT TRAP 72% Nearly three-quarters of consumers still go to the high street to access banking and Micro-market segments 180 ﬁnancial services to describe customer needs Bank and building society branches per million people in England and Wales

Retirement Areas Traditional Urban Centres

where wealthy workers and their solving the current crisis families need branchﬂexibility and an efﬁcient, tailored service to suit Struggling their busy schedules with Housing Minister, Brandon Lewis MP and Blue-Collar Districts

where competitively priced products, Labour's Shadow Minister Emma Reynolds MP and timely access to relevant services and guidance is needed

The leverage ratio: Trapped in the Opportunity to solve Bricks and clicks: the too blunt a tool? rental market the housing crisis future of branchesof locations, telephone and online Patrick Jenkins, Alex Hilton, Roger Harding, Director of Stephen Williams, In 56% channels are more Financial Editor, Director, Communications, Policy Northern Financial of locations, branches Financial Times Generation Rent and Campaigns, Shelter % Services Partner, Deloitte likely to be in are more likely to be page 5 page 8 page 9 page 10 demand in demand SOCIETY matters SOCIETY matters welcome opinion

contents

opinion 3 Hello and welcome to Competition and diversity: why one is part of the other the Autumn edition of education 4 MyBnk: hands-on money management Society Matters comment 5 The Leverage Ratio: too blunt a tool?

policy special 6 Housing: solving the current crisis Trapped in the rental market Politicians must grasp the opportunity to solve our housing crisis Competition and diversity: analysis 10 Bricks and Clicks The housing market is still a hot topic. Despite being pulled to pieces every which way, it is still going why one is part of the other information 11 Women: key to a commercial future? strong in the national press and on social media. In one of its news releases back in May, the Bank of England You can understand why. There are a lot of different commented that “lending to businesses is highly concentrated, overview 12 Improving access to payments elements that contribute to the UK's housing situation with the four largest banks holding an SME banking market and if I were to build a word cloud of the most often share of around 80%. Had the market been more diverse insight 13 used phrases in our office alone, I am fairly sure Help other lenders may have been able to fill the void left by the All In for a better future By ROBIN FIETH, BSA to Buy, house price bubbles, interest rate rises and large banks when they decreased their lending.” Chief Executive new associates 14 house building would feature prominently. Vermilian his was exactly the role element – diversity: a wide range of leverage ratio in June contained would depend on the extent to played by building societies competitors with different business some disturbing views on the which other firms – banks and Allied Surveyors and Valuers Ltd n a personal level, I have a firm interest in all in the residential mortgage models, ownership structures, sizes, impact of some aspects of the building societies – replace the Huntswood matters housing-related, and not just because Tmarket during the post locations and objectives. Overall, proposed leverage framework on affected societies’ market share.” I work in financial services. Growing up, I lived financial crisis period. For a competition should achieve better building societies. They recognised Verging on anti-competitive? Oin Preston, Lancashire and Salford, Greater number of years, building societies prices and terms for consumers. that some societies might need to diary 16 Manchester before settling in central London. 'Up were responsible for all net new Diversity introduces wider choice move up the risk curve and diversify We continue to support the BSA events 2014 north' my weekly rent varied from £45 a week to mortgage lending, while other and greater resilience in times into other asset classes. This seems thoughtful approach proposed a whopping £63 in 2010, however in London the lenders deleveraged their balance of stress. perverse for capital framework by the European Parliament and majority of people I know - most of whom are sheets and rebuilt their capital. proposals primarily geared to reflected in the CRD4 package unmarried, mid-twenties and just starting out in There is still some way to go to reduce risk. Coupled with the – differentiation, with several Society Matters is a publication of the Building their chosen careers - face rents that amount to If building societies had been get diversity in financial services fact that the PRA generally, and different leverage ratios set for Societies Association – ISSN 1756-5928. much more than half of their monthly wage. Even dependant on wholesale markets properly valued as an integral often quite rightly, constrains such business models of varying riskiness. The views expressed by authors in this with a 90 or 95% loan to value mortgage, saving in the same way as the banks this part of a competitive market. One diversification, it starts to sound a magazine are not necessarily those of the BSA. just 5% to put towards a property in the capital could not have happened, as we big question is “what is financial little impractical. The FPC text begs the question Chief Executive Robin Fieth is exceptionally difficult, putting home owning would all have been affected by services being regulated towards?” where the Bank/PRA/FPC stands [email protected] aspirations on the backburner for now. the crunch in the same way. The If I were to be cynical, I might say The FPC also concluded that on diversity? It is one of the point is not that one structure multiple providers that all look “reduced business activity by reasons why in advance of the Editor Victoria Bamber In this edition of Society Matters, we have given is superior to the other, but that very much like each other. those building societies bound General Election, the BSA will be [email protected] both the Government and the Opposition an they are different. by the leverage ratio could affect campaigning for regulators to be BSA, 6th Floor, York House, opportunity to elaborate on what their party has On this note, the Financial Policy their mortgage lending volume. given a statutory diversity objective 23 Kingsway, London, WC2B 6UJ done, or will do, to help solve the UK's housing I am a big supporter of driving Committee's (FPC) review of the The macroeconomic impact to sit alongside their existing www.bsa.org.uk crisis. We also welcome contributions from Deloitte a competitive financial services competition objectives. on the future of the branch, Patrick Jenkins, market. The ingredients of a Designed by Whatever Design Ltd, Banking Editor of the Financial Times on the properly functioning market "For a number of years, building societies www.whateverdesign.co.uk Next steps Leverage Ratio and My Bnk on financial education include multiple providers were responsible for all net new mortgage Printed by Trident Printing, and the changing school curriculum. competing to supply goods and lending, while other lenders deleveraged Robin Fieth is now on Twitter. www.tridentprinting.co.uk VICTORIA BAMBER services into a chosen market. You can find and follow him at Enjoy. Society Matters Editor However there is another important their balance sheets and rebuilt their capital." @bsaceo

2 SOCIETY matters | AUTUMN 2014 AUTUMN 2014 | SOCIETY matters 3 SOCIETY matters SOCIETY matters education comment MyBnk: hands-on The Leverage Ratio:

By LILY LAPENNA, money management Chief Executive, MyBnk too blunt a tool? This year, buried away beneath the tarring of Blackadder’s history lessons and overshadowed by the discarding of American classics, a new shiny National Curriculum contained a potently game-changing element for young people’s attainment and aspirations: Financial Education.

traditional view is still held Education, or sex, drugs and APR by many that it is the job of as it is now sometimes referred to. parents or peers to teach Calculations of things like loans, Athese lessons and instil will be taught in Maths. While it prudent values and that young is no magic bullet, this is a huge people should learn the hard way, achievement which also ends one like I did. However, with UK personal of the biggest no brainers in how debt standing at £1.4 trillion and a we set young people up for real tight job market, the margins are life. Or does it? just too thin to muddle through as we may have done so in the past. There is no extra funding for teacher training in this niche area, And the Department for Education those over 16 will miss out on agrees. This September, for the very these lessons and academies and first time, 11-16 year olds in English free schools can opt out of the secondary schools will learn how to National Curriculum. What class budget and borrow responsibly and time there is will be limited. This As the Prudential Regulation Authority rolls out its Leverage understand taxes and products like need for expertise, to maximise the programmes and enterprise people in 300 schools a year. Ratio approach beyond the biggest lenders, the requirements pensions. Much of this will sit in impact, was picked up by the think challenges. I brought in experts Trained and observed for weeks By PATRICK JENKINS, Citizenship and Personal Social tank Centre for Social Justice’s from financial services, education, and tested regularly, trainers were highlight the challenges faced by the building society sector Financial Editor, and Health ‘Restoring the Balance’ report even neuroscientists and clowns to rated excellent by 82% of young Financial Times which strongly recommended the create workshops that mine youth people and 74% of teachers. in raising capital without external shareholders. Government fund and instruct culture and bring money to life. schools to bring in experts This opportunity is too important he five years since the financial crisis But there was fallout. The way in which the PRA will find it harder and slower to raise capital, from the third sector to deliver This model of design and direct to take the chance, and we want have been dominated by the sometimes test was conceived – using a simplistic leverage given the absence of outside shareholders. money lessons. delivery has seen us work with over to work with more teachers and arcane, always painful process of ratio to compare equity to overall assets – not 500 schools and youth groups, financial services to give young Tregulatory change. only exposed a capital shortfall at Barclays. It And yet, the push for extra capital could well be MyBnk started in 2007 with a reaching 100,000 young people. people the knowledge they don’t also suggested that Britain’s biggest building timely, given the focus of building societies on the youth-led bank offering saving Today we have joint ventures and get in everyday lessons and the The UK, bruised more than most by the society needed to find as much as £2 billion UK housing market – and the focus of so much and lending facilities at Bethnal franchise partners across the UK life skills they need to stay out of collapse of so many banks, has gone further pounds. Nationwide criticised the regulator’s debate these days on a house price bubble. Green Technology College. and a consulting arm that allows us unmanageable debt, save regularly, than most. The question now is whether we are 'crude' measure. We backed them to support and train organisations understand how banks work and seeing an overreaction that will cause a whole The ratio comparing UK house prices to what up with hands- from Brunei to Uganda. We also make the big sustainable move new set of problems – and do particular damage “For building societies, a people earn – and therefore presumably to on money deliver the face-to-face element into independence. to building societies. leverage ratio may be too what people can afford – has accelerated management of The Money Advice Service and out of all connection with historic precedent. and student Despite the severity of the crisis, there were blunt a tool. Maybe floors on The statistics for London, where evidence of financial literacy for the National Next steps finance Citizen Service. remarkably few disasters in the building mortgage risk-weightings, a bubble is the most difficult to deny, show a For more information about MyBnk, society sector. Even the failure and rescue of 1980s multiple of less than 4 times leaping to It takes just six days and over email [email protected] or call Dunfermline Building Society in 2009 was as implemented in a record high of 8 times today, according to £4,300 to train one of our 020 7377 8770 smooth. The deal was a success, mixing a Scandinavia, would the Nationwide first time buyer index. Education Officers to private-sector solution, through a transfer of deliver on average 500 assets to the Nationwide, with a chunk of be better.” When interest rates rise, the bubble, at least in hours of money lessons Government bail-out money. the south-east, risks deflating at best, and at to around 3,500 young Like it or not, regulators are focusing more worst bursting in a sticky mess. But it was also an example of the kind of sharply on leverage ratios and paying relatively solution policymakers want to see the back of. less attention to more easily manipulable capital For building societies, a leverage ratio may be They have a dual goal now – to make the system measures based on risk-weightings of assets. too blunt a tool. Maybe floors on mortgage safer but at the same time to keep taxpayers off For building societies, whose core business is risk-weightings, as implemented in Scandinavia, the hook in any future collapses. traditionally low-risk, low-capital mortgage would be better. But whatever the measure, the lending, this could represent a big problem. truth is that bigger buffers on capital are prudent. The first flush of the regulatory crack-down has been directed at the big banks. Last Not only will capital requirements grow, as Next steps summer the Prudential Regulation Authority the PRA rolls out its leverage ratio approach (PRA) bounced Barclays into a £5.8bn rights beyond the biggest lenders. It also imposes the You can find and follow Patrick Jenkins on issue following a stress test. requirements on a sector that by its very nature Twitter @patrickjenkins_

4 SOCIETY matters | AUTUMN 2014 AUTUMN 2014 | SOCIETY matters 5 SOCIETY matters SOCIETY matters policy special policy special Housing: solving the current crisis Housing: an issue high up on everyone's agenda and one "For more and more people, the dream of owning a that doesn't look to be leaving the headlines any time home of their own is further out of reach than ever soon. With the General Election just around the corner before. Increasing numbers of young people and and waves of different schemes and initiatives families are finding themselves renting privately being implemented or in the pipeline, we gave and for longer, in a sector that provides little By BRANDON LEWIS, the current Government and the Opposition the security and all too often is sub-standard. If you're By EMMA REYNOLDS, Minister of State for Shadow Minister Housing and Planning opportunity to discuss what they have done, or waiting in the queue for a social home, then for Housing and MP and MP for Great for Wolverhampton Yarmouth plan to do, to solve the UK's housing crisis. there are 1.6 million families ahead of you." North East

ometimes you can only Right to Buy sales are up 31%, With planning permission for here is a simple cause for this Labour has committed to getting Survey, 60 per cent of members make things better by meaning more council tenants major housing developments up and that is that for too long 200,000 homes built a year by cited access to finance as a major pulling them apart and now have the freedom of home 23% last year, we are turning we haven’t been building 2020 and our Housing Commission, barrier to their ability to increase Sstarting all over again. It ownership. House builders are a corner. The real test however, Tenough homes as a country. chaired by Sir Michael Lyons, has their output of new homes, more is a daunting prospect, but this lining up to heap praise on the comes in the answer to this This problem did not begin with spent the past year drawing up a than any other factor. is the decision we had to take Scheme which has boosted output question: would you rather be the current Government, but, roadmap for how we can deliver on when we inherited a housing by a third since it was introduced. lending, building, or buying under David Cameron, it is getting that commitment in Government. So the next Labour Government quagmire in 2010. Most importantly though, the today, or five years ago? I am far worse. Housebuilding in the will provide Government scheme is matching families with confident that the answer to past four years is lower than at any We have also set out plans to guarantees for banks lending to House building had plummeted new properties that suit their needs. all three is ‘today.’ time in peacetime since the 1920s. release more land. We’ve been SME construction firms in a similar to levels on par with the 1920s We’re not even building half the clear that we will keep the National way to how the current Help to Buy and the social housing stock-pile "The real test These vital components to number of homes we need. Planning Policy Framework but scheme underwrites mortgages. had shrunk as the queue for them a healthy market have been we will improve it by ensuring only got longer; five million people however, comes in given a new lease of life. House This failure to build also has that local authorities that want to However these steps alone will not deep, to be precise. House building the answer to this building under this Government much wider economic costs. The expand but do not have the land be enough. Given the severity of the is a priority for the wellbeing and is delivering jobs and giving increasing lack of affordable homes can do so through a right to grow. shortage, we will also need some happiness of British families, and question: would you hard-working people the is having an impact on the ability big scale solutions. Which is why the it is quite clear that Labour shirked rather be lending, homes they want. of businesses to recruit and retain next Labour Government will forge this responsibility. staff. The Governor of the Bank of "This problem ahead with the next generation of building, or buying The opposition’s triple threat England, Mark Carney, has said that did not begin New Towns and Garden Cities. Something had to change. Unlike today, or five years of housing tax increases, rent the housing market is the single the previous Government, we have control and legal action against biggest threat to economic recovery. with the current By contrast the Tories and Lib Dems shown that it is deeds, not words ago? I am confident new developments is not the Government, can only offer more of the same. that get the crucial things done. that the answer to right answer. Labour is determined to tackle the Their initiatives to boost house We tore down the regional spatial root causes of this crisis. We don't but, under David building have consistently failed to strategies and banished brownfield all three is ‘today.’ " release enough land to build homes Cameron, it is deliver. Their biggest initiative, Help bureaucracy. We detangled the on. In some cases that's because it's to Buy, is, it is true, helping to boost planning system, and ended the We are supporting all corners of constrained by the planning system getting far worse." demand, but here the Government stalemate between banks, builders the housing market to deliver the Next steps and in other cases it's because we hasn’t understood basic economics. and buyers. number of homes we require. don’t build fast enough on the land Alongside this, Labour is determined Boosting demand without boosting Opening up 5,000 serviced plots You can find Brandon Lewis on Twitter that is released. We have a house to reform the land market. We will supply will simply see prices pushed We’ve also introduced the Help to means more areas can embrace @BrandonLewis or visit his building industry that has become bring an end to land-banking by out of reach of aspiring buyers. Buy schemes to get more families innovative offsite construction website at www.brandonlewis.co too reliant on volume house giving local authorities the power to on the first rung of the housing methods. A development in Walsall builders and lacks competition. levy fines and use proper compulsory The next Labour Government will ladder, and embraced new and saw two family homes erected in Thirty years ago smaller purchase powers on those who sit succeed where this Government innovative forms of house building a single day, an achievement never housebuilders built two thirds of on land with planning permission, so has failed. Nobody should be in to diversify the industry. before witnessed in the UK and our homes but last year, that had that they have to 'use it or lose it.' any doubt about our determination an example prime to be matched dropped to less than a third. We to deliver the reforms we need to This approach is working. We’ve around the country. have also seen a dramatic fall in We have also set out plans to reform double house-building, restore the built over 480,000 homes since homes built by local authorities and and increase competitiveness in dream of home ownership and to July 2010, including 200,000 The Build to Rent programme will the wider public sector. the house building industry. Earlier give families the security of a home affordable homes. House take care of the needs of private this year, Chris Leslie, Labour's they can afford. building is at its highest level since rental tenants through increased That's why Labour has made Shadow Chief Secretary and myself 2007, up 22% on last year alone, choice and affordability. Councils housing a priority for the next announced the details of Labour's while the construction sector has are already building new homes at Labour Government. Both Ed Help to Build policy specifically Next steps been growing for the past 15 the fastest rate for 23 years, and Miliband and Ed Balls have made designed to help SME builders. You can find Emma Reynolds on months, and is now taking on £300 million in extra borrowing clear that building more homes is Twitter @EmmaReynoldsMP new recruits at the fastest rate power will enable councils to key to building a balanced recovery In the Federation of Master or visit her website at for 17 years. continue this success. and fairer economy. Builders' 2013 House Builder www.emmareynolds.org.uk

6 SOCIETY matters | AUTUMN 2014 AUTUMN 2014 | SOCIETY matters 7 SOCIETY matters SOCIETY matters policy special policy special Politicians must Trapped in the grasp the opportunity to solve our housing crisis rental market With the general election just nine months away, it’s hard to think of a time in recent decades when housing has been higher up the public Whilst the building society sector has helped many or political agenda. As voters start to think seriously about who they’re first time buyers get on the property ladder, obtaining By ROGER going to vote for, polls now show housing is consistently a top five HARDING, Director a mortgage is still a challenge for some. With interest issue for them – beating the likes of education, crime and Europe. of Communications, rate rises on the horizon for 2015 and the market still Policy and Campaigns volatile, the private rented sector can sometimes be n part, sadly, this is because things have got considerably worse. England’s housing crisis By ALEX HILTON, is now affecting many more people, on all Director, Generation Rent the only option, but there are problems... Ikinds of incomes in all kinds of places across the country. he UK housing market has “Longer tenancies desperation as aspiration, so children now face moving transformed in the past politicians should be making private home several times during their Failures of successive governments to build decade, with the number would give renters renting a better place to live. childhood, with all the educational enough homes mean rents are high and house Tof private renters doubling peace of mind disruption that will entail. Longer prices have significantly outstripped wages over % as home ownership has started to At the root of many problems is tenancies would give renters peace the past ten years. An entire generation of young decline. Mainstream commentators and start to close the culture of short tenancies. of mind and start to close the gap people are working and saving only to find the % % have assumed that this shift began the gap between Secure tenure lasts six months between private renting and home dream of a home of their own slipping out of % with the credit crunch and the to a year. At the end of the year, ownership. reach – worrying not just them but their parents disappearance of high loan-to-value private renting and the landlord might raise the rent too. Many more are stuck in unstable or poor % mortgages, but the uncomfortable home ownership.” by more than the tenant can Landlords tell us they are obliged quality private rented accommodation, with the truth is that first-time buyers afford. This uncertainty means to offer short tenancies by prospect of remaining there for years to come. have been getting rarer for much tenants can’t truly settle mortgage lenders who require longer. Between 2002 and 2003 in and call their house quick repossession in the event At the same time, our housing safety net – the number of first mortgages fell and their wider of default. Some lenders are now which should prevent people being trapped in from 532,000 to 367,000, just as neighbourhood giving landlords terms that allow a downward spiral towards homelessness, just house prices passed five times the home. Two longer tenancies, and rent receivers because they’ve lost their job – is being eroded. median income. million allow them to avoid turfing tenants At Shelter, we see the consequences of this out, so this should no longer be a every day through the millions of people who For more than a decade, house valid excuse. come to us for help. prices have simply been too high and private renters have got stuck. The major blockage instead is the We desperately need politicians of all parties renting simply isn’t suitable for the people None of this is easy – it requires A majority of them would prefer to letting agents who insist on annual to show leadership, and to do so with a level who now live there, including over one million commitment and boldness. But it’s clear own a house – 67%, according to renewal because it suits their of ambition that matches the scale of both the families with children. We want to see improved that there is growing public demand polling we commissioned in March business model. That’s why we problem and public concern about it. Piecemeal stability and affordability, as well as significantly for the housing crisis to be solved once this year. believe tenants need a statutory measures and lip service are not sufficient, and improved conditions. Right now we have a real and for all, and people are demanding right to a longer tenancy. Until that will not fool those affected. opportunity to improve the lives of millions of leadership. The worst option, after all, is The policy response to this trend happens, we urge more mortgage private renters by securing a change in the law doing nothing. If no action is taken, house has been feeble: the only thing lenders to start accommodating At the root of the housing crisis is the urgent to stop people being evicted from their home prices will double in the next ten years, and offered to renters is a ticket out longer tenancies. need to build more affordable homes – we are just for complaining about poor conditions. half of people aged 20-34 will be stuck of the sector in the form of Help currently not building even half of what we living with their parents. More people will to Buy, which has so far assisted need. Shelter recently collaborated with KPMG “If no action is taken, end up facing eviction, repossession and Next steps barely 1% of the country’s renters. to produce a programme for housing for the house prices will double ultimately homelessness. It doesn’t help that premium Generation Rent is the first next Government – showing that this can be interest rates on the state- campaign to represent all private done. We need a combination of increased in the next ten years, That gives you a sense of what’s at stake in guaranteed 95% mortgages make renters in the UK – we launched investment in affordable housing and reform and half of people aged May. It’s time politicians of all parties stepped monthly repayments more costly in March 2014 with funding from of a market which just isn’t delivering. Getting up to the challenge. than equivalent rents. the Nationwide Foundation. In June cheaper land and finance into the hands of 20-34 will be stuck living we published our manifesto which those who want to build is central to this. with their parents. More There is nothing for the 99% proposed reforms to make the Next steps who remain stuck in a second private rented sector fit to live in In the short and medium term, more can also people will end up facing class tenure that offers them high the 21st century, including five-year be done to improve the private rented sector, eviction, repossession and For more information about Shelter and the costs and no security. The desire tenancies. Find out more at which has expanded significantly in recent work that they do, follow them on Twitter for home ownership is as much www.generationrent.org years. The instability and expense of private ultimately homelessness.” @Shelter or find them on Facebook

8 SOCIETY matters | AUTUMN 2014 AUTUMN 2014 | SOCIETY matters 9 72% Nearly three-quarters of consumers still go to the high street to access banking and Micro-market segments 180 ﬁnancial services to describe customer needs Bank and building society branches per million people in England and Wales

Retirement Areas Traditional Urban Centres

where new ‘silver surfers’ appreciate where students, job seekers and house convenient locations and the support hunters need a blend of convenience of sta as they shift to using direct channels and no-nonsense guidance to help them take their first steps towards financial independence Booming Towns SOCIETY matters and Villages 72% SOCIETY matters where footfall is currently low but employment and retirement is Nearly three-quartersSuper Conurbations bringing new customers analysis where a new type of young, information to the area of consumers stillaffluent go customer is seeking a mix of contemporary formats, convenience to the high streetand personalto service to guide them Declining Rural access bankingth randough new product purchases Communities Micro-market segments 180 financial services where the population is falling and to describe customer needs Bank and building growing older, and businesses are struggling Communter Zones key to a society branches per million where wealthy workers and their Women: families need branchflexibility and people in England and Wales an efficient, tailored service to suit Struggling their busy schedules Blue-Collar Districts Retirementwhere competitivelyAreas priced products, Traditional Urban Centres and timely access to relevant services commercial future? where new ‘silver surfers’ appreciateand guidance is needed where students, job seekers and house convenient locations and the support hunters need a blend of convenience of sta as they shift to using direct channels and no-nonsense guidance to help them take their first steps towards In a recent Society Matters article, building society Chief Executives Bricks and Clicksfinancial independence Booming Towns and Villages talked about their vision for the future of the sector. But what where footfall is currently low but of locations, employment and retirement is Super Conurbations72% about the future of the people working within it? We have bringing new customers telephone and online where a new type of young, to the area In affluentNearly customer is thrseekingee-quarters a mix of 56% channels are more ofcontempo locations,rary formats, convenience branches adapted to changes in technology, yet we cling to the old ways By AVERIL LEIMON, and personalof consumers service to guide them still go Chief Executive, White Declining Rural likely to be in arthroughe mor new producte likely purchases to be of doing business, despite dramatically changing demographics. Communities to the high street to Water Group where the population is falling and demand in demand growing older, and businesses he future of business is are struggling Communteraccess Zones banking and Micro-market segments bright, but only for those 180 where wealthy workersfinancial and their services "Men and women want to work hard and full time but in ways that to describe customer needs families need branchflexibility and visionary leaders who an efficient, tailored service to suit 72% Bank and building their busy schedules embrace new work styles allow work-life integration that previous generations sacrificed." Struggling T Nearly three-quarters Blue-Collar Districts and encourage diversity. society branches per million of consumers still go where competitively priced products, and timely access to relevant services The old guard has done well, people in England and Wales and guidance is needed to the high street to establishing and running successfulaccess banking and Micro-market segments organisations. Why would they 180 financial services to describe customer needs want to change the status quo? Retirement Areas Bank and building Traditional Urban Centres Those coming up behind have where new ‘silver surfers’ appreciate of locations,society branches per million where students, job seekers and house a different life experience and hunters need a blend of convenience convenient locations and the support seek new ways to work and live. of sta as they shift to using direct channels telephone andpeople online in England and Wales and no-nonsense guidance to help them take their firstIn steps56 towards % Innovation now will benefit the By STEPHEN channels are more of locations,financial independence branches customer, the organisation and, Booming Towns WILLIAMS, Northern likely to be in are more likely to be attract and retain employees as Retirement Areas Traditional Urban Centres and Villages Financial Services demand in demand diverse as the customers, with all where new ‘silver surfers’ appreciate where students, job seekers and house where footfall is currently low but Partner at Deloitte the related benefits, for example, convenient locations and the support Super Conurbations hunters need a blend of convenience employment and retirement is of sta as they shift to using direct channels increasedand no-nonsenseinnovation guidance and to improved help bringing new customers them take their first steps towards where a new type of young, to the area bottomfinancial line. independenceWomen may be the affluent customer is seeking a mix of Recent news stories continueBooming to batter Towns Britain’s once-thriving branchcontempo networks.rary formats, convenience first to benefit, but men will enjoy and Villages and personal service to guide them new ways of working too. through new product purchases Declining Rural Some branches continue towher e facefootfall is cur rtheently low butrisk of closure as banks, and some building Communities employment and retirement is Super Conurbations bringing new customers Simple steps to future proof your where a new type of young, societies, manage rising operatingto thecosts area and face new market and political uncertainty. where the population is falling and organisation: affluent customer is seeking a mix of growing older, and businesses contemporary formats, convenience are struggling Communter Zones • Measure outputsand personalnot hours service to guide them Declining Rural through new product purchases fter more than a decade of rationalisation, At Deloitte, we analysed over 10,400 branch ‘blue-collar’where wealthy areas, workers ‘super’ and their conurbations, spent in the building. People Communities branch networks are still ill-placed and locations in England and Wales, along with 56 commuterfamilies needzones, branch andflexibility young and urban centres. think they use modern theories ill-equipped to meet the needs of theirwhe re the populationvariables is falling across and current and forecast changes in an efficient, tailored service to suit of motivation – Maslow’s growing older, and businesses their busy schedules Struggling customers in the digital age. Conventional consumerare struggling behaviour, age structures, personal Understanding these branch micro-economics is hierarchy andCommunter the like, Zones but Blue-Collar Districts A wisdom suggests that the increasing use of wealth, economics and business demography. the essential first step towards creating the ideal are actuallywhe oftenre wealthy stuck workers and their families need branchflexibility and • Learn to trust people. Old people to ask for flexible and beliefs by incumbents who where competitively priced products, direct channels by a growing online and mobile With the results we have written a report Bricks network footprint and significantly reducing cost- unconsciously in McGregor’s an efficient, tailored service to suit fashioned Command and working but many people do not developed their skills when life and timely access to relevant services population makes the branch nothing more than and Clicks: MappingStruggling the future of branches which to-income ratios. Demand varies from one micro- Theory X –their you busy need schedules to stand and guidance is needed Control leadership just want to work less or easier. Men was slightly different. Increasingly, a costly relic of an analogue era. investigatesBlue-Co the forcesllar Districts of change on today’s retail market to the next and if banks and building behind people with a big stick to doesn’t work long term. and women want to work hard men and women will seek the bank wheandre competitivelybuilding pricedsociety products, branch networks. societies are going to keep pace with consumers’ ensure they work. Beliefs take a It turns grown ups into and full time but in ways that opportunity to live the full life, Our view at Deloitte is that branches remain and timely access to relevant services needs, careful consideration will need to be long time to relinquish despite and guidance is needed recalcitrant children. Good allow work-life integration that including taking family responsibility key to the success of retail banking institutions. Our findings suggest that branches are indeed given to where, when and how products and proof to the contrary. Women leadership, like good parenting, previous generations sacrificed. – caring for an aging population or Our consumer surveys conducted over the last poised for a renaissance – but perhaps not in services are provided. And only those that build are frustrated by institutionalised allows people to grow and Habits handed down from the the citizens of tomorrow. If these twelve years suggested that branches were their current numbers or formats. At one end their branch proposition on the most appropriate presenteeism and low develop. It is based on clarity Victorian era will not attract top are the type of motivated people of locations,the only practical focal point for banks and of the spectrum, the branch needs to become balance between ‘bricks and clicks’ will be the productivity. Measuring what of requirements and trust talent or inspire loyalty. you want to employ, then modern telephonebuilding and societiesonline to deliver the right mix of a simple, convenient gateway to more direct winners with customers. people achieve, irrespective of of locations, In 56% in your ability to hire and • Fish from the entire talent pool. leadership is everything. convenience, service and value to customers. channels so customers can self-serve; in other when and where they are, gives empower good people, not channelsThis wasare reinforcedmore in our 2013 Consumer formats, branches needtelephone to shift oftheir and locations, focus online from branches women control over their entire Firms which adopt new ways of Next steps In 56% your need to know where they Review: Reinventing the role of the high street routine over-the-counter cash transactions to lives. Younger men want to working, will be able to attract likely to be in channelsare ar more more elikely to be of locations, branches are at all times. Allow people to which showed consumers were seeking an providing a tailored, informed and personal For a copy of Bricks and Clicks: Mapping work this way too as they seek and keep the best candidates function as fully autonomous Next steps integrateddemand shopping experience delivered across service for new and existing customerslikelyin demand to on be the in the future of branches please visit: are more likelyto align to all be aspects of their lives of both genders throughout adults who can manage their all channels both digital and physical. hunt for competitively priced financialdemand products. www.deloitte.co.uk/bricksandclicks in demand– when they work, family, sport, their career, giving significant For more information contact own schedule and have an Alternatively contact Stephen Williams, Northern friends. Women flourish in more commercial advantage. [email protected] innate desire to do their best. Approached in the right way the high street The research shows that bank locations can now Financial Services Partner on stephenwilliams@ Theory Y cultures where leaders or call 0207 036 8899. represents a new opportunity for Britain’s banks be placed into seven key micro-markets. These deloitte.co.uk | 0113 292 1231, or Harvey motivate, build effective teams, • Embrace agile working as the Conclusions You can visit the White Water and building societies to create the integrated are retirement areas, ‘booming’ towns and Lewis, Director of Analytics Research on foster trust and see people in style of the future. Recent New leadership styles require Group website at multi-channel environment they aspire to. villages, declining rural communities, struggling [email protected] or 0207 303 6805 their entire life context. changes to the law ‘allows’ a considerable shift in values www.whitewatergroup.eu

10 SOCIETY matters | AUTUMN 2014 AUTUMN 2014 | SOCIETY matters 11 SOCIETY matters SOCIETY matters overview insight Improving access to payments A market that has a diverse range of financial services providers results in a wider choice for consumers. However for the challengers, By ABBAS RANA, Strategy Manager, it is vital that options for securing access to payments systems need Payments Council to be fair in order for them to compete on a level playing field.

he UK is fortunate to benefit from world In addition, earlier this year the Payments and provide them with indirect access. class payment systems. Whether taking Council launched Paym, a way to make direct Sponsors and the challengers agree on money out from a cash machine, sending account-to-account payments using a mobile the technical requirements, the levels of Tan online banking payment or writing a number, without the need for sort codes service and commercial arrangements. cheque, our payments system is the invisible or account numbers. This is a compelling By becoming agencies, challengers avoid network that consumers, financial institutions and payments proposition for banks to offer their the requirements associated with full businesses rely on to pay others and to get paid. customers, with money transferred using membership and some sponsors can Faster Payments or LINK. offer agency access to several payment All In Customers access these services via their bank systems. Of course, an organisation does or building society, so it’s vital that access is Considering access to all or some of these not have to be a challenger to choose available to new ‘challenger’ institutions, such as payment systems has resource, cost and agency banking and many smaller financial building societies which have had a local focus operational implications and challengers need to organisations find it a convenient option. for a better future in the past but are now looking to expand their decide which of these systems they would like to geographical base. access and how they would like to access them. With the emphasis on competition, By MICHELLE MONCK, innovation and payment users, how Involving everyone is the objective of Ipswich Building General Manager HM Treasury and the Office for Fair Trading Options for access challengers and other entities access Marketing, Ipswich both published papers on access to payments payment systems will be one of the Society’s new take on the mutual membership model. Building Society There are two broad ways that a challenger can in 2013 highlighting the importance of fair and areas of focus for the PSR. Resilience and secure access to these payment systems. There reasonable access to payments for all payments stability will always have a cost attached are advantages and challenges related to both. se your core, is the advice The future is might mean, to involve our We’ve developed a branded and financial service providers in promoting – the question becomes how they can be of a Pilates instructor I member-shaped members, putting them back at package that seeks to achieve competition in the UK banking industry. The • Direct access or full membership preserved whilst simultaneously ensuring know; it’s the source of the centre of our thinking. It’s a those aims and deliberately new Payment Systems Regulator (PSR) becomes Challengers can apply for full membership competition is vibrant and the barriers to inner strength. And looking It is a distinction of fundamental tipping point, if you like, but we reflects our beliefs in the central fully operational in April 2015 with responsibility of the payment schemes listed above and entry are as low as possible. U importance that as a building to the core is vital for success in now see more clearly that the importance of membership in to promote effective competition in the markets arrange direct access into the payments business too. To have a robust and society we are owned by our members secure the Society, not our mutual building society. for payment systems. infrastructure. There are specific successful brand, it’s important to members, act in their interests the other way about. criteria for becoming a full Next steps be true to the ideas and principles and in those of the wider The components Challenger institutions can help promote member which seek to ensure community – we all help each For more information that lie at its heart. It’s a win-win-win of membership competition in the financial services industry and the robustness, resilience and other, that’s the whole point. But about the Payments When everyone’s involved, great Firstly, All In invites members to in turn, offer more choice to customers. However, secure nature of this crucial At the core of Ipswich Building a passive membership that does Council and the work things happen. Greater focus on enjoy being members. We began in order for them to compete on a level playing infrastructure. Some of these Society are our members. Always not participate in the operation that they do visit the interests, the ideas, the views, a soft launch with a calendar field, they have to consider their options for criteria require resources and have been – they own the Society, of the Society, in its decision- www.payments and the needs of members can of member events. Not tickets securing access to the payments systems and how arrangements which the after all. Yet despite consistently making or governance, that council.org.uk bring benefits for all. The aims for Beyoncé, but more intimate these options best meets their need in developing challenger may not be in outperforming banks on doesn’t contribute to its vision or of All In, as our membership social events – chiefly cultural compelling propositions for their customers. a position to deploy or service, the connection between support its ideas, is no membership programme is branded, are – providing an opportunity make. The requirement of members and the building at all. Worse yet, it erodes any shared between those that for members to share a Payments Systems a settlement account, full society has drifted towards the real difference between building benefit members directly, those membership experience. Our membership commitments transactional. They rate us highly, societies and the rest. There are several payment systems that that support our communities, events programme also supports and adhering to regular with satisfaction scores regularly challengers need to consider and those that secure the local organisations who rely on security and operational over 90%, but it’s not enough That is why we’re developing future of the society. corporate (continued overleaf) • Faster Payments: near real-time phone, assessments are some to differentiate. our ideas of what membership internet and mobile payments 24 hours a examples of requirements day, seven days a week. that some challengers might • Bacs: processes all Direct Debits and not be able to meet or may Direct Credits choose not to meet. "...despite consistently • Cheques: core to a cheque-based current • Agency Banking outperforming banks on account proposition The alternative option is for challengers to enter service, the connection • CHAPS: same-day high-value payments for an arrangement with some of financial institution, corporates customers, between members and the the larger banks who provide and some retail transactions access on their behalf. In this building society has drifted • LINK: connects virtually all the UK’s 67,693 arrangement, the larger banks towards the transactional." ATMs to enable cash withdrawals act as sponsors for challengers

12 SOCIETY matters | AUTUMN 2014 AUTUMN 2014 | SOCIETY matters 13 SOCIETY matters SOCIETY matters insight new associates Allied Surveyors sponsorship to survive, publicising representative we are, the stronger and actions and we’ll publish our An active and engaged their work and introducing a new we shall be. satisfaction scores. membership is the key to a and Valuers Ltd audience. Other direct benefits successful and secure future for that make All In appealing And there’s a big difference Finally, we believe there is a mutuals of all types. It ensures include local discounts. between having a vote and having genuine desire among members transparency in our operations, a voice. Most of us encourage to find ways to benefit others. creates loyalty among our We also aim to create stronger feedback or monitor customer We have long given up staff members, and earns us an ties by developing the idea of satisfaction and promotion, but time to support local causes, it’s important place in the financial ownership. It is a pity that so few what are we really hearing? To part of our responsible business and landscape of the country. members exercise their rights to listen and respond to our members’ ethos. But we now want to go vote on important issues, yet they opinions and ideas, we’re creating further and help bring together Allied Surveyors and Valuers Ltd is The business uses Quest Associates and in panel management. Appraisers UK own the Society and can influence more direct channels that enable local voluntary groups with our Next steps its direction. We’re finding new members to rate and review events members to share information essentially a cooperative, owned by its Valuation Exchange (Xit2) connectivity procures independent mortgage valuation ways to encourage more direct and and products. We’re publishing the about their services and needs All In has launched this September 43 shareholding Chartered Surveyors, software and is innovative in the use of advice and specialist services advice for democratic involvement with the comments left on our feedback and encourage our members to – you can find out more at covering England and Wales. The valuation data and on-site equipment but mortgage lenders and other businesses Society, not least because the more surveys along with our responses take part in volunteering. www.ibs.co.uk/members-lounge company is quality assured by Lloyds resists such initiatives as “doorstep sign-off” such as two ‘challenger banks’, a peer- Register with a rigorous internal auditing as the surveyors believe that further research to-peer lender and a specialist supplier regime run by Chris Rispin, the company’s and contemplation are part of the process of data to the housebuilding industry. All director of technical services. of diligent analysis and reporting. With residential property valuations are health "It is a pity that so few an established private client business, the checked against AVM data and commercial Allied is well established within the arena surveyors are proficient in carrying out RICS property valuations are audited including members exercise of mortgage valuations but has a particular HomeBuyer Reports and Building Surveys. valuation checking. their rights to vote on specialisation in the field of residential investment property from BTLs to complex Allied’s CEO is Robert Bryant-Pearson who important issues, yet HMOs. The company also has a commercial has worked in property and surveying they own the Society property valuation department. All surveyors throughout his 40 year career. He is also are specialists in their field and the vast managing director of Appraisers UK a Further information: and can influence majority have worked for many years in their surveyor panel management business which www.alliedsurveyors.com. geographical areas to live up to the firm’s is owned and run entirely separately from its direction." www.apppraisersuk.com or mantra of offering ‘national coverage with Allied by Simon Jago and Jackie Turrell each telephone 03336667777 local knowledge’. of whom has more than 10 years’ experience

Vermilian Huntswood

A new way to get access to cost-efficient Vermilian’s focus is to help you compete with Our considerable experience in the financial Huntswood, as the leading specialists in makes us the preferred partner for so many of recently MMR. Such challenges go beyond digital marketing and business support. the innovation of competitors with bigger sector has taught us that innovation is not the retail conduct risk, are ideally positioned our clients. Our size and focus means that by the rule book, affecting the very heart of You’ve seen the reports. You’ve read the budgets. We are a secure digital agency sole domain of those who have big budgets. No to partner fellow BSA members through partnering with us you work with our directors your organisation. At each stage of every statistics. They all seem to agree on one specialising in banking technology and matter what your current situation, we can help the ever changing regulatory agenda. and decision makers which ensures the right engagement, we seek to understand your truth in the financial industry – digital marketing. you overcome the digital technological wall. From the provision of industry insight decisions are made at the right level and at the business, the challenges faced and the end matters. to helping our clients resolve complex right time with your stakeholders. state in mind and we tailor our advice and Through our experience as an online channels issues in highly challenging markets, we support in these regards. Nowadays, it seems like you’re falling behind if partner for over 70 of Australia’s building actively seek to build relationships that In addressing the specific challenges of the you don’t offer a smartphone app, tablet app, societies, credit unions, mutual banks last the distance. Through our specialisms conduct risk agenda, we understand that For us our clients, people and knowledge and an engaging mobile responsive website. and superannuation funds, we’ve built an in advisory services, managed resource, for BSA members, the desire to deliver fair are at the centre of everything we do. On top of that, you have to keep up with integrated product suite that we believe is truly business improvement, learning and outcomes for customers is not a regulatory compliance obligations, corporate governance, innovative and effective, including: development, and recruitment, we are dictate, but an embedded core of firms cost reduction initiatives and other related • intranet systems well positioned to support you in your DNA. Working with Huntswood you can be pressures that are growing every day. Further information: response to the challenges faced within assured that we share your vision and through • board corporate governance extranets the regulated, dynamic environment in our expertise in areas such as behavioural Can we help? Let’s get together and And if you’re like many Societies, you may be • website, minisite and mobile website design which we operate. economics and cultural enhancement, we not discuss how you can bring your organisation saying: “that’s great, but we don’t have the only provide assurance, but a platform for • smartphone and tablet app development further into the digital realm. Contact us resources or the budget to build all of this on As FCA appointed skilled persons with a wealth enhancing the customer proposition. • digital marketing and online channel today through our London office www. our own. How can we possibly keep up?” The of experience within the sector, Huntswood Within the sector we have been working to Further information: management vermilian.com/contact-us.html or visit secret to balancing these competing demands can be seen as the partner of choice in the support member firms in their preparation, our project portfolio at www.vermilian. Visit www.huntswood.com or contact is in the digital collaboration to deliver cost • eBusiness strategy, transformation provision of assurance to senior management, implementation and validation of approaches com/about-project-portfolio.html Neville Cotton at [email protected] and innovation efficiencies. planning and implementation however it is the manner of our delivery that to challenges such as RDR and more

14 SOCIETY matters | AUTUMN 2014 AUTUMN 2014 | SOCIETY matters 15 SOCIETY matters diary

BSA events 2014 Educational, networking and knowledge sharing events for the building society sector.

Audit and accounting update BSA mortgage seminar BSA Annual Lunch Leicester, 2 October 2014 London, 21 October 2014 London, 13 November 2014

In a highly specialist and regulated sector it is This year's mortgage seminar analyses the Celebrate the sector's achievements, discuss important for societies and auditors to keep up challenges for mortgage professionals of the matters of interest with industry peers and to date with changing regulatory, auditing and fast moving regulatory and political landscape network with key contacts from government, accounting requirements. and delivers practical insight, guidance and regulators, industry bodies, the media and ideas from policy makers, analysts and leading other organisations that work closely with and This popular annual seminar, organised industry practitioners. support our sector. in conjunction with KPMG LLP, provides a summary of recent changes and reminders of key requirements and explains the implications Introduction to … compliance Complaints seminar for building societies and their auditors, with and legal London, 20 November 2014 presentations from specialists with extensive London, 4 November 2014 financial sector and building society experience. This seminar will cover the FCA's views from Expert speakers will run through what can be their complaints thematic review, a view from Senior management expected of these functions, relationships with FOS of the areas where complaints handling arrangements senior management, outsourcing and other key needs improvement and practical guidance on practical areas. making the most of root cause analysis as a London, 9 October 2014 tool to improve future service.

Regulatory changes under the banking reform An introduction to treasury legislation will be very significant for deposit- management Seminar for newly appointed takers, their senior management and their staff. directors London, 5 November 2014 This event, in conjunction with Eversheds LLP, London, 27 November 2014 looks in detail at the practical implications and This course provides an overview of treasury what firms should be doing in preparation. operations within financial services, more This seminar provides an intensive introduction specifically within building societies and within to the issues faced by new directors. It allows How mutuals can stay relevant the regulatory environment. There is also an participants to discuss a range of current in an increasingly digital world in-depth study of treasury operations, focussing issues including the business environment, the on liquidity, wholesale funding, credit risk and board environment and the current regulatory London, 14 October 2014 financial risk. environment, and facilitates an exchange of ideas on industry issues. The BSA and The Digital Banking Club are jointly hosting a debate for building societies to explore Treasury risk management how mutuals can stay relevant in an increasingly Seminar for established London, 6 November 2014 digital world. directors The objective of this course is to provide London, 2 December 2014 Introduction to … financial participants with an overview of the financial services regulation and balance sheet risks a building society This seminar provides directors with an faces as a consequence of being a mortgage update on matters affecting the sector and London, 16 October 2014 lender and how these risks are managed by the features presentations on current policy and treasury function. regulatory issues. This event, run in conjunction with Addleshaw Goddard LLP, is part of a series of BSA introductory seminars and workshops designed to provide key information about major retail financial services topics to new starters and others. Next steps For more information and to register, visit bsa.org.uk/events

16 SOCIETY matters | AUTUMN 2014