FINTECH FOCUS: COMMUNITY BANKING
Localheroes? Real community banking in the UK? Pigs might fly, thought Ron Delnevo, Chair of Cash and Card Consultants. But then he spoke to Matt Grant, CEO, of Your Money Hub, and now his hopes are restored I gave up years ago urging traditional high street banks to stop closing their bricks and mortar branches, because I realised it was a waste of breath. The number of UK bank and building society branches peaked at more than 20,000 in the late 1980s. Today, in 2021, there are fewer than 7,000 – and, every month, more are permanently closing. Several thousand communities around the UK that previously enjoyed bank branch services now have none. The dye is cast as far as the UK’s Big Five banks are concerned. They evidently envisage a purely digital future for themselves and their customers. They are expending huge resources in an effort to turn that vision into a reality, as they seek to fend off competition from a growing number of app-based banks. Starling and Monzo are only the best known of a plethora of new market entrants. The Big Five are all PLCs, so have a duty to their owners to increase shareholder value. Their focus on a digital future has been a commercial decision that they clearly believe is in the best interests of shareholders. It is difficult to argue they do not have every right to make that decision. So, having given up on the traditional banks as providers of community banking services, I started to look around for alternatives. In doing so, I quickly decided that a revival of the UK building society movement is a pipedream, so I looked further afield for viable solutions. It was around five years ago that I realised that Australia had produced a solution that should work in the UK. It came in the shape of the Bendigo Community Bank. The Bendigo Community Bank model was conceived in the late 1990s, in response to a series of bank branch closures in rural Australia. In a situation very similar to the UK experience, between 1993 and 2000 more than 2,000 bank branches had closed across the country. Businesses
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in turn abandoned these increasingly economically-challenged communities. Residents in small rural settlements were particularly alarmed by their suddenly unbanked status and the impact on their beleaguered local economies. Community buy-in to having their own bank is vital to the Bendigo model. In particular, communities are required to put some upfront skin in the game in the form of investment capital to establish a bricks and mortar operation. In the early years, the required investment was around A$300,000; today the local capital commitment is closer to A$700,000. Typically, between 100 and 200 local residents step forward to make the required investment, becoming shareholders in the venture.
It is imperative that we put community banking in place before thousands of UK communities wither and die Matt Grant, Your Money Hub
Bendigo Community Bank branches operate under what is essentially a franchise model. Revenue is split between the bank and the local community enterprise on a 50/50 basis on basic banking products. For more complex products, Bendigo Bank’s share of revenues is higher. In return, Bendigo Bank is responsible for IT, products, capital, and regulatory and compliance issues for the community bank, and undertakes staff training. The profits made by the local community enterprises are primarily used to fund local projects that are aimed at making the lives of residents better. On average, around 20 per cent of a community’s share of revenues is allocated for dividends to reward the local shareholders. The Bendigo model works. There are more than 300 Community Bank branches
operating successfully around Australia. At least one of those communities has fewer than 1,000 adult residents. Bendigo is keen to share its learnings, and has visited the UK on several occasions. However, those visits have not proved to be the catalyst for the launch of community banking here. When UK Finance announced its Community Access To Cash Pilot scheme, funded by a £1million contribution from the LINK ATM Network, I had high hopes that one of the solutions piloted would be community banking. Sure enough, something called a Bank Hub was created in several of the eight pilot towns, including Rochford in Essex. A website states that Rochford, which has a population of around 20,000 people, has ‘a new bank hub, run by the Post Office and shared by five mainstream banks.’. Inside, there is a counter where cash can be withdrawn and deposited; a free-to-use ATM; a machine where cash can be deposited; and each of the Big Five banks sends in one member of their staff, one day a week, to lend a hand in providing services to locals who pop in. The whole show cost £120,000 to put together. It is good to see that the Post Office, despite all its well-publicised troubles with IT systems, still has the wherewithal to get involved, but what has been parachuted into Rochford is a long way off the community banking model pioneered by Bendigo Bank in Australia; local shareholders and their investments are nowhere in sight. To get an insider view of the Rochford pilot and, indeed all things community banking, I caught up with Matt Grant, a young entrepreneur who gained his grounding in banking at RBS/NatWest and Citibank, worked with tech startups in the UK, and is now CEO of Your Money Hub, an organisation intent on bringing genuine community banking to the UK and supporting communities that have been deeply affected by the closure of their bank branches. www.fintechf.com
