Guest Blog: What is local banking? The Handelsbanken approach.
By Simon Alderson, Handelsbanken
In recent years, much time has been spent debating ‘local banking’ and the benefits of empowering employees. But, today, while many companies produce reports asserting the confidence bosses have in their capable staff, this sentiment can often seem at odds with the lack of authority actually vested in frontline employees. For instance, when was the last time you met a genuine decision-maker in your local bank branch?
At Handelsbanken, our idea of how we should run a successful bank is rooted in trust and respect for the individual: an unshakeable belief in people and in their desire and ability to do good things well.
Founded in Sweden in 1871, Handelsbanken has over 810 branches in 24 countries worldwide. Here in Great Britain alone, we have over 1,600 members of staff and a network of 174 branches- stretching as far as Truro in Cornwall, to Aberdeen in Scotland. Each branch operates as a small business working to a “church spire” principle, enabling it to make decisions locally and to provide a service that is truly bespoke to the individuals and businesses in their community.
It is no surprise then that our British expansion has been caricatured as a Captain Mainwaring comeback. Indeed, we do offer customers the kind of bespoke, community banking that many remember from the days before service became centralised and depersonalised. Yet our approach is distinctive in many other ways too, from our financial prudence and stability, to our focus on relationships rather than transactions. We believe that business success comes from having satisfied customers. And since our local branch employees are best-placed to understand and satisfy our customers’ needs, the bank entrusts virtually all decisions to them, from credit assessment to product terms and pricing. Head Office’s role is merely to support our branches’ efforts to serve their customers as well as they can.
In order for our branches to be able to focus fully on customer satisfaction, we have steered clear of working with volume or sales targets, or of the financial incentives used to meet them. Instead of bonuses, our staff share in the long-term profitability of the bank through a scheme known as Oktogonen. For every year our bank performs better than our competitors, a portion of the profit is invested into Handelsbanken shares on behalf of each employee. This is of the same monetary value right across the bank- from the new team member joining their local branch as a trainee, to the group chief executive in Stockholm.
Our unwavering focus on customer satisfaction has demonstrably led to business success for Handelsbanken, proving this approach is mutually beneficial; we have outperformed our competitors for 42 years in a row, each time triggering the equal Oktogonen allocation for all of our staff. Our desire to have the most satisfied customers has also been consistently realised, with Handelsbanken being ranked top for customer loyalty and satisfaction for the past five years, in an independent survey of UK individual and corporate banking customers. Our model translates to financial strength too: in their most recent assessment, Bloomberg ranks us as Europe’s, and one of the world’s strongest banks; we retain one of the highest credit ratings of any bank in Europe; and our capital ratio far exceeds the more stringent requirements shortly being introduced across Europe. It goes to show that our customer focused culture and structure is not merely cosmetic; it has been inimitable to our strength.
Demand for the genuine local relationship banking that Handelsbanken has offered for several decades remains strong and is growing across Great Britain. Customers place a high value on the ability to speak to someone at their branch who knows them personally and whose mobile number and email address they are readily given. Knowing that your account manager will take the time to understand your specific financial situation in detail and, crucially, who is empowered to make decisions on your loan, your mortgage or your overdraft means that many of our customers view us as an integral partner in their business’ development or in the management of their own personal finances. For as long as the demand for local relationship banking continues, Handelsbanken will strive to support more customers, in more ways, and in more communities across Great Britain.
Handelsbanken scored 74/100 in the Move Your Money Ethical Scorecard, ranking in the top five for current account option. You can read more about us here.
This story was originally published at moveyourmoney.org.uk in 2014.
