Nationwide CEO: This is a time for mutuals to make a real difference, not least in business

Posted On: 
4th June 2018

Nationwide will prioritise meeting the everyday needs of businesses as it takes steps to enter the business banking market, says Chief Executive, Joe Garner.

Credit: 
PA Images

Nationwide Building Society’s origins go back as far as the middle of the 19th Century. The principles around which the building society was founded, with members rather than shareholders, is still in vogue.

That is according to Joe Garner, the mutual’s chief executive, who took on the role two years ago in April 2016.  “The social purpose continues to guide us through to today. That makes for a very refreshing organisational culture,” he says.

“Many firms claim that the customer is at the heart of what they do. At Nationwide over these years, I’ve really experienced a very deep commitment to put our members at the very centre of everything that we do.”

He adds: “Purpose is fundamental in any organisation. The motivation that derives from that social purpose is much stronger, I believe, than from anything else.”

Nationwide’s London HQ is in the heart of the City of London and it’s here that we meet in Garner’s seventh-floor office overlooking the Bank of England to the right and the Shard to the left.

The earliest components of Nationwide Building Society, whose base is in Swindon, were founded in 1846. The organisation is now the largest building society in the world, boasting more than 15 million members. Domestically, the firm has consolidated around a 12% share of market share in mortgages, 10% in savings accounts and 8% in personal current accounts.

Nationwide has offered a limited range of business savings products, but as yet has not entered the business current account market, with the price of entry proving a barrier, Garner says. But all this could be about to change.

In March, the Society announced its bid for a Royal Bank of Scotland (RBS) fund designed to inject choice into the UK business current account market. Specifically, Nationwide is targeting a share of the £425 million pot set aside by RBS to boost competition in the banking market for small and medium-sized enterprises (SMEs). The Society will apply for Pool B of the fund, as it does not currently offer business banking. The second-tier pool includes awards of up to £50 million.

So, why make this decision now? “For years, we have observed that our members have business needs that we are very well placed to meet. The issue has been that the price of entry has been prohibitively high,” replies Garner.

“Now, with the way that technology is moving and potentially with the support of the RBS remedies fund, we’re able to get over that price of entry and meet our members’ needs, which we know we can do.”

He adds: “In our research, customers already rate us number one for service, not just for personal current accounts but for business accounts. So, we are rated number one for service on business accounts and we don’t yet offer a business account.

“What that’s telling us is our members saying they really believe that if we were to do it, it would be better and we believe that too, which is why we are keen to get across the line.”

The RBS fund will look to break up the dominance of the big five banks (who currently hold 85% of business current accounts). Garner believes that Nationwide’s track record of encouraging customers to switch their personal current accounts can be replicated in this as yet uncharted territory for the mutual.

“There is an interesting branch dimension to this as well, which is even if people do almost all of their banking online through mobile, we believe they still value the presence on the high street and that’s why we’ve been different from many others, very supportive of our network,” he says.

“Of course, it’s not the branches, it’s the people in the branches that make the difference.”

But what is different about Nationwide’s proposition? Garner says that the level of brand trust in the company, its enduring commitment to its members and levels of customer satisfaction present a unique selling point.

“We don’t have to pay shareholders, and we know we can offer better service because that’s what we do on personal current accounts,” he says.

The building society’s offer goes deeper than this, he adds. Garner argues competitors often consider how they can “extract future value” out of the UK’s 5.7m SMEs, whereas Nationwide will prioritise meeting the “everyday needs of everyday businesses” rather than looking to find the “next global entrepreneur”.

“It’s great if we do, but there’s a lot of people out there who aren’t aspiring to that. That’s what’s really different, we are responding to what we hear from our members,” he says.

Garner also feels this approach is in tune with the direction of travel in the economy.

“There’s a real difference. A few years ago, you either worked for a company or you ran a company. Now, you might be somewhere in between. You might be an eBay trader, a web designer, you might do some contract work. It’s a much more fragmented picture,” he says.

“I think that emerging space, met with a mixture of new technology but traditional human values, is the space that we think we can make a difference in.”

Will Nationwide press ahead if the independent body that is reviewing bids for the RBS funds choose a competitor? “It’s an impossible question,” responds Garner.

“What I can say, is that Nationwide has looked at this question on and off over a long period of time. Every time we’ve looked at it previously, we have concluded that the price of entry is too high.

“That’s why we are so interested in this. We know we can meet our members’ needs to do it. If somebody can help us get over that price of entry then we know it can work. We’re focussed on being successful.”

Over time, Garner says he would want Nationwide to achieve a level of market share in the business current account market at a level similar to its other products. He does not want to give the game away in terms of what the product would look like, but says it will focus on what Nationwide’s members want, which is “not necessarily the traditional approach”.

Throughout our conversation, Garner continually refers to Nationwide’s core values; its members-focussed approach and social purpose.

“Interestingly, we are seeing more and more differential now as a result of us being a building society than probably since before the big demutualisation’s, which was at the end of the 1990s,” says Garner.

“One of our sentiment-tracking measures is the belief that we put customer needs ahead of maximising profit. What we’ve seen over the last few years, is that the general public is really starting to see the difference in us putting customer needs first versus an industry that often has to put maximising profit first.

“I wonder sometimes if that is emblematic of the digital economy, the way that increasingly in an internet-enabled world, it is a sharing economy and that is right back to where we were founded.”

He concludes: “I think there’s a number of social conditions that echo the imperatives that led to us being formed in the first place.

“You go back to our foundation, it was all around how do you improve living conditions for what founders call the industrious classes. I think there are some really interesting parallels.

“In many ways, this is a time where there is a space for mutuals of all varieties to make a real difference, not least in business.”