Since its foundation in 1984, UK-based Unity Trust Bank
has carved out a reputation as a bank for which social
responsibility and responsible lending is at the heart of its
business model. As Unity Trust sales and marketing director John
Brooks tells Douglas Blakey, it also makes good business
sense.
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Unity Trust Bank, the
UK-based specialist lender for trade unions, charities, credit
unions and social enterprises, has weathered the economic crisis
better than most of its larger high street rivals.
Even at the height of the crash in
2008, Unity’s annual profits rose. In fiscal 2009, Unity Trust’s
annual profits before tax declined by only around 7% to £6.5m
($10.1m).
John Brooks, Unity Trust’s sales
and marketing director and a veteran of the UK retail banking
sector with 33 years experience, told RBI the bank was in
business to make a profit.
“We do not borrow money and are a
small, conservatively run bank, but we are not solely in it for
hearts and minds,” he said.
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By GlobalDataHow the bank makes a profit is,
however, at the heart of the lender’s operations.
Brooks said: “A key part of our
business model is to be a socially responsible bank. The quality of
how we earn our revenue is very important to us. We are very keen
that we can stand over what we do with a clear conscience – people
say these are noble words, but we do try and put that into
practice.”
So last year, for example, Unity
became the first UK lender to abolish all penalty charges for
account holders.
“It was just another example of how
the quality of what we do is at the centre of our business model,”
Brooks added.
Corporate social
responsibility
The launch of the ALTO MasterCard-branded prepaid card at the
start of the year is, said Brooks, a perfect example of Unity’s
business model in practice: a potentially profitable but socially
responsible product.
Around 40 UK credit unions have
already signed up to offer the ALTO card to its members with
another 50 credit unions expected to debut the product in the next
few weeks.
“The pace of acceleration [in ALTO
sales] has been fairly exponential. It has not been a hard sell to
the credit unions but has required a lot of explanation,” Brooks
said.
In particular, credit unions –
around half of the UK’s 450 credit unions bank with Unity – have
had to educate its members to change life-long habits of dealing
predominantly with cash.
Brooks is already heartened by
positive feedback from Unity’s credit union customers – and excited
by the product’s potential.
“We see credit unions as a viable
business proposition. But the ALTO card has been pitched at the
lowest price possible to make it viable for us; and we have been
very careful when we considered pricing, to pitch at a level that
was reasonable given whom the card is aimed at,” he said.
That has translated
to no monthly fee for cardholders and no charges for point of sale
or online transactions. Charges apply for topping up the card
(£0.50) and ATM withdrawals (£1), but Brooks maintained the typical
cardholder will save money.
“Let me give you an example. I met
a cardholder at a credit union based in Wales, who travelled into
his credit union office every week to collect a small sum of
money,” he said. “The bus fare for each visit to the credit union
office was almost £7. Put that in the context of being able to
access cash from ATMs and the wide availability of MasterCard
acceptance – the ALTO fee is reasonable.”
Looking ahead, the trades
union-majority-owned Unity Trust may benefit from an unlikely
source. The centre-right UK Conservative Party has endured an
awkward relationship with the trades union movement since the
1970s. But prime minister David Cameron’s promotion of the
so-called ‘Big Society’ – including the support, creation and
expansion of mutuals, co-operatives, charities and social
enterprises – interested Brooks.
“The fact that the prime minister
has raised the profile of the general not-for-profit sector can
only be a good thing,” he said.
“More awareness of how such bodies
can create a better society and sustain or help the creation of
social enterprises can only benefit us.”
As for the suggestion that Unity
might expand its range of services to target directly the UK’s 6.5m
trades union members, many of whom are likely to be disaffected
with their current bank, Brooks is admittedly guarded.
“In terms of scale, it is unlikely
that we can ever compete with high street banks but there will be
opportunities to expand our services on a niche basis,” he
added.
“We are and continue to look at ways where, on a niche basis we
can offer expanded services to customers, such as, for example,
trades union members.”
