And we capitalists believe that markets are fundamentally efficient. That means that if we allow market forces to work freely in any category, customers ultimately will get what they want and then competition ensures that progress and innovation continue to improve their options.
With that in mind, there are many reasons why Britain’s broken banking sector makes me unhappy. But perhaps the most disturbing issue is the prolonged ability of these diseased and distrusted institutions to not only survive in the post global financial crisis world but to actually thrive. Among Britain’s top mortgage lenders are brands like Lloyds (rescued from disaster by the UK Government in 2009), Santander (downgraded by Moody’s last year because of credit fears), Barclays (mired in scandals, its head of compliance has just stepped down citing “stress”), RBS (equally scandal-riddled, loss-making and part-owned by the Government).
Don’t get me wrong, there will always be badly run brands in even the most efficient markets. The point is you don’t expect that list of brands to account for almost two-thirds of British mortgage lending. Consumer dissatisfaction and branded differentiation should combine to ensure superior alternatives emerge to improve the category and kill the crap brands.
But that has not been happening. I have been waiting for a genuine brand with a differentiated offer to arrive and start kicking some proverbial marketing arse. Many thought it was going to be the Co-op Bank but a series of financial mis-steps and a large bag of crystal meth have eliminated that option. Just as I was about to give up all hope, a hero brand is emerging – Nationwide Building Society.
There are several reasons to believe that Nationwide will be our saviour. First, it is owned by its customers because it’s a good old-fashioned mutual. There’s no greedy shareholders, no dodgy hedge funds, no ownership structure in far-off tax havens.
Second, the management team, headed by chief executive Graham Beale and marketing director Chris Rhodes, are directly accessible and accountable to customers via their regular TalkBack sessions. Furthermore, both Beale and Rhodes (and I hope they will forgive me for saying this) look like supremely decent and extremely boring executives. No evil twinkle in their eyes. No thinly disguised aggressive streak. No love for fox hunting at the weekends.
Ignore what the media said about Beale’s ‘fat cat bonus’ of £2.3m. It is a lot of money but he deserves it based on his brand’s performance last year. His approach has led to a 30 per cent rise in customers switching their accounts to Nationwide in the past year and profits rising by 155 per cent in the past six months. There’s a world of difference between this well-earned bonus and a case like RBS where £600m of taxpayer’s money was paid to executives whose bank was losing billions.
To add further evidence of Nationwide’s differentiation and decency, its headquarters are in Swindon. I like that. The further you can base your people away from the dirty corporate corridors of London, the better.
Then there is the brand positioning of Nationwide. First, let me acknowledge that I think its stated brand positioning, which spells out the word PRIDE, is old-fashioned crap. But I will waive that because, frankly, I am a desperate man when it comes to financial services. Provided they are not a) evil, b) bankrupt, or c) managed by men addled by class A drugs consumed in a car park, I am going to see this as a truly differentiated position. The bar is so low in financial services that Nationwide could still attain Apple levels of differentiation simply by being decent.
Where I would praise Nationwide in particular is its execution of its positioning. The recent ‘On Your Side’ campaigns are a fabulous communication of the differences that Nationwide genuinely offers. My only criticism is the brand could go harder after its less palatable rivals to make its case. The more Nationwide can invest in these campaigns in the years ahead, the more likely it will emerge as a genuinely differentiated brand and the faster we can restore normal capitalist service to the diseased and disaffected financial services industry.