A thriving mutuals sector is good for society, but turning words into action may require the industry to focus on the greater good.
The Financial Conduct Authority (FCA) has announced a series of measures designed to support the growth of the mutuals sector, putting plans behind the Government’s lofty manifesto pledge to double the size of the sector over the Parliament. The changes include streamlining regulation, simplifying applications and launching a new Mutual Societies Development Unit to provide advice and support to navigate policy and legislative changes.
As a result of this focus on the sector from the regulator and Government, we can expect to see much greater activity in the coming years.
Mutuals currently serve over 30 million members in the UK, made up of 42 building societies, 350 credit unions and 93 mutual insurance firms. There are another 12 million memberships across over 8,400 co-operative and community benefit societies. Together, they over £223bn in assets and include housing associations, social clubs and retail societies. Far from being a hidden corner of banking, the mutuals sector is a force to be reckoned with.
However, awareness alone isn’t enough. The sector must convert this understanding into new account openings and bigger deposits by demonstrating that saving or borrowing through a mutual is a trustworthy, beneficial and more socially responsible choice.
The membership model reinvests profits to benefit members, ensuring their long-term needs drive key decisions. Nationwide is a clear success here, promising to keep every branch open until 2030, understanding the demand for both in-person and online banking. While others have become digital-first or digital-only, Nationwide has doubled down on remaining part of our local high-streets, offering a more inclusive way to access services for members.
The sector’s largest opportunity lies with consumers who fall outside the rigid criteria of mainstream banks and have been overlooked, despite showing significant demand for a provider that aligns social responsibility with profit making.
Many smaller mutuals and credit unions are providing similar levels of service, prioritising a sense of community while also offering competitive savings rates.
However, too many smaller players can dilute the impact, particularly when they are all jostling for the same market share with similar product ranges.
Mergers and acquisitions could be the way forward, combining reach and influence to more effectively challenge the big high-street banks without losing the member and community focus that sets them apart. Beyond simply increasing scale, consolidation can also help to drive innovation, enable investment in digital technology and create more resilient financial providers, that offer a more personal level of service.
With the right policy and regulatory support in place, the industry now has the chance to grow stronger together, creating mutuals and credit unions that can expand their reach, enhance their services and compete more effectively to give consumers better than the current status quo.