The Fidelity Fiduciary App
Author: Jeremy Leggett, policy advisor at ACRE
If Michael Banks in ‘Mary Poppins’, were to wisely invest his tuppence in The Bank today, he would not give it, face-to face, to a cashier. The transition from banks with a branch in every town, to banks that aspire to have apps in every pocket has taken little time at all.
Managing accounts, however, is now a source of significant stress for many people, particularly those who are not confident using online or telephone banking. But this is not just personal customers, many people who manage the organisations that make up civil society in rural areas – village halls, parish councils, community groups – are struggling to access banking services that are becoming digital by default.
Customers are supposed to be at the centre of a bank’s duties, so why have services to some customers become so stressful? We are told that the move to online banking is something being demanded by users, this is not the main reason for the change.
It is worth remembering that banks in every town, and even larger villages, were a direct consequence of physical currency. In the UK, management of notes and coins required a social contract between the state and the retail banks. It was the responsibility of these ‘clearing’ banks to manage currency on behalf of the Bank of England and, in return, their unrivalled status in every community went unchallenged.
Greater competition between the established banks and new ‘challenger’ banks has been a conscious decision of policy over recent years, but one that only started to take real effect once banks were able to go online. A new challenger bank, with a clever online presence and no responsibility for physical currency, can easily compete with the established banks in a way that would not have been possible before. Add concerted action by the banking regulators to remove ‘friction’ for people changing banks, and the conditions for a ‘race to the bottom’ to dispose of expensive estate and workforce was complete.
The move from face-to-face banking to call centres, websites, then apps and the consequent disappearance of cash and a requirement for ‘standardised’ accounts have all come about because of this policy to prioritise market competition. As a result, there are almost no bank branches remaining in rural parts of England today; charities and parish councils struggle to manage their particular accounts, and people who are not confident with IT hang on to cash-based ‘workarounds’, with all the risk this entails.
Increasingly, bank staff have little experience of helping customers face-to-face and few have ever helped charity customers through the banks’ tricky mandate and anti-fraud procedures. If in future websites and call-centre scripts will be written by people without this experience, so customer service is unlikely to improve?
What are the solutions? ACRE and a group of other charities have been working with UK Finance (the banks’ trade association) over the past year to find ways forward. There are some genuinely difficult and structural challenges that lie alongside the more obvious elements of online banking. It may be possible to create an online resource that could help charities select a bank account that suits their needs – if one exists; but it will be much less easy to solve many of the other issues.
What is needed is a new social contract between the banking industry, government and wider society. A fresh approach would need to recognise that pure market competition may efficiently meet 80% of society’s banking and related requirements but that the remaining 20% will need a safety net - at least until the whole population have the skills and infrastructure that this new, digital, world requires.
In rural areas this may involve a re-invention of the post office or similar institution, with a clear role in bringing together basic financial, transactional, and administrative services within all communities, especially for more vulnerable people. For small charities it may require some banks to specialise and be granted greater leave to co-operate to enable better access. This will need creative intervention by the Treasury, the Charity Commission, the Financial Conduct Authority and the Competition and Markets Authority. It will certainly need leadership from within the charity and rural sectors and the banks themselves.
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