There was a choice of potential topics for this post. Top of the list initially was an examination of what 'deprived' or 'discrimination' really mean, but then I decided that even with my limited audience that was probably too incendiary. So I switched back to safer, work-based topics, and thought about taking apart the phrase 'customer journey', which isn't a new one, but still irritates me now as much as when I first heard it, mainly because of its innate inaccuracy, as well as its general corporate-bull***t-ness.
However, I'm going to talk about banking, and business banking in particular. UK clearing banks, in common with many others round the world, have had a rough time in public perception in recent years, mainly through their own actions it has to be acknowledged. And yet banking, done well, is a critical component of healthy, functioning and growing economy. While God may hate the sin but the love the sinner, it's the other way round in banking - we may and do hate the sinners (bankers), but we need to love the sin (banking), because recycling capital to lend it out multiple times over is to an economy what lungs are to a body.
So we should want banks to succeed, albeit not too much, and certainly not if we suspect there's an uncompetitive market (and for the record, I think the UK market is uncompetitive, but mainly because the barriers to entry are so high, rather than there being any player collusion). However, with recent events it's going to be increasingly difficult for them to succeed. Until now, as long as there weren't any own goals like PPI, and credit policies were reasonably prudent, it was fairly easy to make a profit through what's called NII (net interest income, i.e. the difference between what's paid in deposits and received on lending). But with interest rates now at their super-low levels because of the response to Covid-19, that just got a lot harder.
That comes at a time too when other circumstances, again because of Covid, also changed for the worse. Expectations will be higher because of the role they'll need to play in rejuvenating the economy, and at the same time the effects of the government's business loan schemes will be feeding through - and while any losses will be covered by the UK Treasury, it'll be up to the banks, as things stand, to undertake the administration and management of any loans that aren't repaid - which will be a huge logistical, and therefore costly, challenge. You can see how all this will become a recipe for making large and sustained losses (and I haven't even mentioned the loans that will go bad in the 'regular' lending portfolio as a result of Covid).
And this is where it begins to get a bit personal, as it's looking strongly like my next assignment will be to spend a couple of months working out how to avert the kind of poor performance that currently seems to be on the cards for the business banking part of a large UK bank. I won't be doing that alone of course; it's likely there'll be a team of three of us, but still, it's quite a big topic for a small team to get to grips with in a relatively short period.
We've already got our terms of reference for the work, so we know very roughly the questions the client will expect us to be able to answer. And yes, some of it will undoubtedly involve cost cutting - but not all of it. For the first time in a while, it looks like we'll be given the scope to think about where business banking might find more income. That's been a verboten question in recent times as a result of the mis-selling scandals, but these crazy times seem to have put it back on the agenda. We'll have our ideas, but comments and responses to this would be most welcome from any small business owners, or people with experience in the sector, particularly to questions that include:
- With what types of organisation do you spend money on financial services other than clearing banks? Why? What circumstances would persuade you to switch that spend to your bank?
- Would you trust your clearing bank to provide accountancy-type services as part of your response to HMRC's Making Tax Digital project?
- Have you wanted to buy any product or service online from a clearing bank, but found that wasn't possible? What was it? How did you eventually source that product or service?
- Are there any non-traditional financial products or services (e.g. payroll) that you would consider buying through your bank?
Any comments on the quality of your internet banking app would also be gratefully received.
To conclude, and reflecting on all that, it's a funny old job, being a consultant. I know we have the image of being smooth-talking, jargon-wielding, smart suit-wearing, too-clever-by-half idiots hired only to tell clients what time it says on their wristwatch, but I don't feel like I tick any of those boxes. (Well, maybe one - sometimes the client has only just learned to tell the time, and he/she's grateful for confirmation that it's definitely five to midnight). More of the time, at least in my case, it feels like I'm there to clear up other people's messes. In the forthcoming work, it's not the bank's fault - it's down to whoever you choose to blame Covid on. Previously, it has been bank staff, software suppliers, organisational culture, and a whole load of other things. Being external gives you a liberating freedom to speak truth, sensitively, and recommend tough things. Do we provide insights and choices that the client couldn't have worked out for themselves? Rarely. Do we generate discussions and decisions that just wouldn't have happened had we not been around? Frequently.
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