Oliver Wyman, a leading global management-consulting firm, published a new report on co-operative banks, which highlights the challenges faced by co-operative banks across the world, as well as the opportunities ahead.
The report is a follow up of two successful surveys on co-operative banks carried out by Oliver Wyman and tries to assess the current state of co-operative banks across the world. It looks at the relationships between co-operative banks and their members and clients and their contributions to their communities. Eight co-operative banks from Finland, France, Germany, Italy, Netherlands and Switzerland participated in the survey.
The report reveals that two thirds of co-operative banks participating in the study developed projects to help less-favoured client segments. Co-operative banks also donate to social action three times more than their shareholder-owned counterparts (as a share of revenues).
According to the report, co-operative banks face three main challenges in the years ahead. The main one is continuing to show the “co-operative difference”. Some co-operative banks have grown beyond their community of origin, having more customers than members.
However, co-operatives need to continue to support their defining communities, both through financing and local presence. The Basel III agreement places another burden on co-operative banks, by increasing capital and liquidity requirements.
To address these challenges, the report suggests co-operative banks must invest in skilled staff, tools and new governance standards. This means that co-operative banks will need to make good decisions about the allocation of their scarce risk capital and liquidity and will also need to be more disciplined in managing costs.
The report highlights that co-operative banks should try to increase their portion of customers who are members and engage them in running the business. Oliver Wyman consultancy believes co-operative banks should reinforce their community ethos by doing even more to help local communities and members.
The report reads: “Co-operative banks can advertise their social value by some form of ‘dual bottom line accounting’, which shows not only financial performance, but some numeric measure of social contribution”.
Technology remains another challenge for co-operative banks, forcing them to revisit the way in which they deliver services across the various channels such as physical branches, online and mobile. Co-operative banks tend to rely on face-to-face interaction with customers through their local branches.
In its report, Oliver Wyman consultancy implies that technology could be a means to rejuvenate the co-operative relationship and revitalise physical branches. They can also make use of technological developments to improve the involvement of members in the bank’s life. This could help attract more with young members, especially since half of the banks participating in Oliver Wyman’s survey believe they are under-represented in the younger customer segment.
The report is available online.
