Could Banks Learn from Building Societies?

by Mark Johnston

Could Banks Learn from Building Societies?

Over the last couple of years the financial sector has been involved in a series of incredibly serious errors of judgements, many of which have involved the large major banks.

These errors have left many consumers questioning who they are ‘doing business’ with.

Recent figures have shown that consumer confidence in banks has plummeted to a real low as many consumers no longer trust them to look after their money.

Last year a YouGov poll showed that around 60 per cent of all the general public no longer trusted the big banks.

A study also showed however that 27 per cent of consumers felt that they have very little trust left in their banks but they were not planning to switch to another financial institution.

Customer satisfaction between mainstream banks and building societies has never been more marked than in recent months.

According to research conducted by Which?, the consumer group, Coventry, Nationwide and Yorkshire building societies all beat banking giants such as Barclays, Lloyds TSB and Santander in the customer satisfaction stakes.

Mike Lazenby, chief executive of Kent Reliance building society, stated “building societies serve their customers as first priority”.

Therefore, last year was a particularly important one for building societies as banks had to face up to continuing scandals which included London Interbank Offered Rates (LIBOR) fixing, payment protection insurance mis-selling scandal and computer glitches that meant many customers had no access to their finances.

Nevertheless, all these seemed to lead building societies in to billing themselves as a ‘better alternative’. As a result of this recent data has shown a that more customers have now switched to building societies.

Reports have revealed that overall throughout the financial crisis most building societies have remained stable.

Adrian Coles, the director general of the Building Societies Association (BSA), said “over the last three years building societies have got in to much less trouble than banks”.

Brian Murphy, of the Mortgage Advice Bureau, suggests that building societies have “continued to bring competitively priced and innovative products to the market”.

Research shows that banks did seem to contribute to the global financial crisis which in turn helped to push the UK’s economy in to a recession and thus created financial hardship for millions.

Although, even after all this it still does not appear to have been enough to convince the average customer to seek and alternative.

Banks therefore still seem beyond all reproach, they do not appear to get things right but they never receive the killer blow to their reputations that see customers leave in their droves.

So it seems then that the majority of consumers remain loyal to their local branch.

In conclusion it remains to be seen if building societies can continue to out perform banks for customer service and complaints.

However,  many experts believe that banks could possibly be doing much more to try and retain customers, reward loyal savers and also repair the damage a number of scandals have had on their reputations.

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