The heat is on How charities are tackling climate change - Reliance Bank
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Published by Civil Society Media
www.civilsociety.co.uk
May 2019
The heat is on
How charities are tackling climate change
Also inside:
How charities are using the apprenticeship levy
Busting the myths around GDPR
Charity Banking Survey 2019
Analysis of the sector’s gender pay gapSURV EY BANKIN G 2 019
Spoilt for choice: competition is
intensifying in the banking sector
Challenger banks are growing in strength and number, prompting the incumbents
to defend their territory, finds Diane Sim.
Restructuring moves once again RBS Group and Santander UK – the former from the riskier activities
provide the backdrop to Charity is the new ringfencing requirement, of the latter and to make it easier to
Finance’s Charity Banking Survey, introduced by the Financial Services manage any failure of a large banking
as the government tries to strengthen (Banking Reform) Act of 2013. group without having to bail them out.
the sector and prevent a recurrence of The measure, which came into As well as streamlining the larger
the failures of the 2008 banking crisis. force this year, requires banks with players, the government is also
The latest measure affecting the at least £25bn of deposits to separate trying to develop the smaller, so-
six largest UK banks by deposits – core retail banking services from called challenger banks to increase
namely Barclays, the Co-operative investment banking. This is intended competition and choice. Measures
Bank, HSBC, Lloyds Banking Group, to aid financial stability by insulating introduced in 2013 to make it easier
to acquire a banking licence and
lower the capital requirements for
FIGURE 1: BANKS USED AS PRIMARY PROVIDER BY CHARITIES1 new banks have seen a steady stream
Charity income of newcomers.
Number of clients < £1m £1m – 5m £5m – 20m > £20m Total They include: Virgin Money and
Barclays 4 7 12 96 119 OneSavings Bank, which floated in
NatWest2 6 4 9 68 87 2014; Aldermore Bank and Shawbrook
Bank, which floated in 2015;
Lloyds Bank3 4 8 8 61 81
Clydesdale Bank and Yorkshire Bank,
HSBC 4 7 3 37 51 which were demerged from National
RBS 2
1 3 34 38 Australia Bank and listed on the
CAF Bank 20 8 2 1 31 London and Australian stockmarkets
Reliance Bank 21 1 22 as holding company CYBG in 2016;
and Metro Bank, which made its stock
Co-operative Bank 10 7 4 21
market debut the same year. Other
Coutts2 1 13 14 new entrants include privately financed
Unity Trust Bank 8 5 13 digital banks Atom, ClearBank,
Bank of Scotland3 1 3 7 11 Monzo, N26, Revolut, Starling,
Allied Irish Bank4 7 7
Tandem and Tide.
More recently, these smaller
Handelsbanken 1 1 1 2 5
banks have begun to strengthen
Clydesdale Bank / Yorkshire Bank5 1 3 4 their presence in the UK market by
Triodos 1 3 4 undertaking mergers and acquisitions.
C Hoare & Co 1 2 3 Last October, CYBG completed its
£1.7bn acquisition of Virgin Money,
Santander 1 1 1 3
creating the UK’s sixth largest bank
Charity Bank 2 2
with more than six million customers
Other 2 6 8 and £84bn of assets, which is double
Total 86 59 36 343 524 the size of any other challenger
(1) B ased on data provided by 350 members of the Charity 100 and Charity 250 Indexes, plus
bank. Over the next three years,
194 survey respondents (minus the overlap). the combined group will transition
(2) Part of RBS Group to the Virgin Money brand.
(3) Part of Lloyds Banking Group
(4) Part of AIB Group Earlier in 2018, Tandem acquired
(5) Both parts of holding company CYBG, spun off from National Australia Bank in February 2016. Harrods Bank, while South African
2 Charity Finance | May 2019 | www.civilsociety.co.uk © Civil Society Media LimitedS URVEY BANKING 2019
banking conglomerate FirstRand challenger banks and other financial Additional banks are used by
acquired Aldermore. And, this year, services providers to increase their charities for a wide variety of functions
OneSavings Bank announced its business banking capabilities. The first including loans, international
proposed acquisition of rival Charter awards from this fund, made earlier payments, foreign exchange
Court in a deal that would create one this year by the independent Banking transactions, trading subsidiaries
of the UK’s largest specialist lenders Competition Remedies body, include and Islamic finance products.
with a focus on buy-to-let mortgages. £120m to Metro Bank, £100m to Their main use, however, is for
Divestments by Lloyds Banking Starling Bank and £60m to ClearBank. deposits, as charities seek to maximise
Group and RBS Group, mandated Unsuccessful bidders in the first round, their cover from deposit protection
by the European Commission to meet including CYBG, Co-operative Bank
requirements for entitlement to state and TSB, will be able to apply to a
aid, have also slimmed down the larger second pool of funds later this year.
FIGURE 2: SECONDARY BANKS
banks and beefed up the smaller ones. USED BY CHARITIES
Lloyds Banking Group fulfilled its HIGH STREET VERSUS HSBC 10%
obligations by demerging Lloyds TSB CHALLENGER BANKS Lloyds Bank 9%
in 2013 and selling its stake in TSB While the competitive landscape is Santander 8%
Bank in two 50 per cent tranches in undoubtedly changing, increases in
Virgin Money 8%
2014 and 2015. TSB is now owned choice take time to change customer
by Banco Sabadell, though the Spanish behaviour. Barclays 7%
bank recently revealed its intention As figure 1 shows, primary banking Nationwide Building Society 6%
to sell TSB in the next few years. relationships with charities are still CAF Bank 5%
RBS Group’s abortive plan to divest dominated by the main four high-street NatWest 5%
over 300 branches under the Williams groups, with the only real challenges
Close Brothers 3%
& Glyn brand by the end of 2017 was coming from the Co-operative Bank
superseded by “an alternative remedies and the specialist banks focused on the Co-operative Bank 3%
package” agreed by HM Treasury not-for-profit sector. Clydesdale Bank / Yorkshire Bank 3%
and the European Commissioner That said, challenger banks – Charity Bank 3%
responsible for competition policy. particularly Virgin Money, which CCLA 3%
The package requires RBS to spend is now part of CYBG, along with
Cambridge & Counties Bank 2%
Scottish Widows Bank 2%
“ Charities’ primary banking Triodos 2%
relationships are still dominated by the RBS
Shawbrook Bank
2%
2%
main four high street banking groups ” Cater Allen 1%
Handelsbanken 1%
£835m to pay business customers to Clydesdale Bank and Yorkshire Bank Metro Bank 1%
switch their accounts to competitors – do have a reasonably strong showing United Trust Bank 1%
and to fund rivals’ growth ambitions. in the list of banks that charities use
Unity Trust Bank 1%
The alternative remedies package in addition to their main banking
also includes a £350m incentivised provider (figure 2). Other 12%
switching scheme, aimed at
encouraging up to 200,000 RBS and
NatWest SME customers to switch
FIGURE 3: CHANGING BANKS
their accounts to other banks through One in four banks will review their main bank shortly
preferential terms such as free banking
or cash offers.
but only one in eight expect to switch
The nine challenger banks Do you expect to undertake a review of your main bank in the next six months?
currently participating in this scheme Yes No
include TSB, Co-operative Bank, 2019 24 76
Starling, Santander UK, Metro Bank, 2017 32 68
Handelsbanken, CYBG, Hampden &
0% 20% 40% 60% 80% 100%
Co and Arbuthnot Latham. Monzo
and Nationwide will join the scheme Do you expect to change your main bank in the next six months?
once they have developed a current Yes No
account for business customers. 2019 13 87
The package also includes a £425m 2017 18 82
Capability and Innovation Fund,
0% 20% 40% 60% 80% 100%
charged with awarding grants to
© Civil Society Media Limited Charity Finance | May 2019 | www.civilsociety.co.uk 3SU RV EY BA N KIN G 2 0 1 9
insurance for balances up to £85,000 survey. Small charities with an annual sample and, while it does not purport
and look for higher interest rates income of under £1m are well to represent the charity banking
than their main bank provides. represented and make up 44 per cent market as a whole, it provides fairly
As competition intensifies, of the survey sample. The remainder is comprehensive coverage of large
challenger banks are raising their split between: charities in the £1m-£5m charities with annual incomes of over
profile among charities. Monzo, for income bracket (30 per cent); those in £20m and more selective coverage
example, has recently partnered with the £5m-£20m income bracket (19 per of small and medium-sized charities.
The Big Issue on a scheme called Pay cent); and large charities with an The large-charity segment is
It Forward, which enables The Big income of over £20m (7 per cent). dominated by the big four high street
Issue magazine to be resold by readers, The survey data has been banks, namely Barclays, HSBC, Lloyds
with the proceeds of every subsequent supplemented with data sourced from Banking Group (comprising Lloyds
sale credited to the original vendor. the UK’s top 350 charities, which are Bank and Bank of Scotland) and RBS
routinely tracked for the purposes of Group (comprising NatWest, RBS and
RESPONSE LEVELS compiling the haysmacintyre / Charity Coutts). Together, these four are the
Almost 200 charities participated Finance Charity Indexes. main banks to 93 per cent of charities
in Charity Finance’s annual banking Figure 1 is based on this combined with annual incomes of over £20m.
FIGURE 4: CUSTOMER SATISFACTION RATINGS
Relationship manager Branch services Telephone services
NatWest 2.28 Lloyds 1.83 Reliance Bank 2.69
Co-operative 2.07
Barclays 2.15 Barclays 1.72 Barclays 1.86
CAF 1.83
Lloyds 2.06 HSBC 1.64
NatWest 1.82
HSBC 0.90 NatWest 1.17 Lloyds 1.79
HSBC 1.73
Overall 2.02 Overall 1.68 Overall 2.02
0 1 2 3 0 1 2 3 0 1 2 3
Very Very Very Very Very Very
dissatisfied satisfied dissatisfied satisfied dissatisfied satisfied
Internet services Sector knowledge Fees/charges
Unity Trust 2.70 Reliance Bank 2.58 Reliance Bank 2.50
NatWest 2.37 Co-operative 2.00
Co-operative 2.20
Barclays 2.30 Lloyds 1.95
Reliance Bank 2.24 CAF 2.15 Unity Trust 1.80
HSBC 2.08 Lloyds 1.94 Barclays 1.70
CAF 2.08 HSBC 1.50
Barclays 1.84
Co-operative 2.06 NatWest 1.47
Lloyds 2.05 NatWest 1.72 CAF 1.44
Overall 2.19 Overall 1.96 Overall 1.79
0 1 2 3 0 1 2 3 0 1 2 3
Very Very Very Very Very Very
dissatisfied satisfied dissatisfied satisfied dissatisfied satisfied
Interest rates Commitment to CSR1 Overall
Reliance Bank 1.73 Reliance Bank 2.78 Unity Trust 2.70
Barclays 1.13 CAF 2.10 Reliance Bank 2.52
Co-operative 1.94
Co-operative 1.09 Co-operative 2.07 Barclays 1.85
CAF 0.90 Barclays 2.00 Lloyds 1.72
Lloyds 0.83 Lloyds 1.67 CAF 1.70
NatWest
NatWest 0.71 NatWest 1.38 HSBC 1.33
Overall 1.11 Overall 2.00 Overall 1.88
0 1 2 3 0 1 2 3 0 1 2 3
Very Very Very Very Very Very
dissatisfied satisfied dissatisfied satisfied dissatisfied satisfied
(1) Corporate social responsibility Note: Banks with fewer than ten charities rating their services have been excluded. Satisfaction
ratings have been calculated by assigning responses with values and then calculating an average:
“very satisfied” = 3, “fairly satisfied” = 2, “slightly dissatisfied” = 1, “very dissatisfied” = 0
4 Charity Finance | May 2019 | www.civilsociety.co.uk © Civil Society Media LimitedS URVEY BANKING 2019
Barclays is the main single provider it one of the biggest new banks our communicating the social benefit
to charities in this income bracket UK regulator has ever authorised.” that they claim usage of their products
with a 28 per cent share of main For some banks, ringfencing has had and services creates.
relationships. RBS Group has a 34 a direct impact on their relationship CAF Bank, for example, purports
per cent share split between NatWest management strategies. Barclays head to deliver both social and economic
(20 per cent), RBS (10 per cent) and of charities and citizenship Nazreen benefit to its customers by giving
Coutts (4 per cent). Lloyds Banking Visram says: “Following the successful its surpluses back to its owner, the
Group has a 20 per cent share of main completion of our structural reform Charities Aid Foundation (CAF).
banking relationships with charities programme, charities with income Head of charities Neil Poynton says:
in this segment, split between Lloyds greater than £6.5m are served by “For many charities, the ability to
Bank (18 per cent) and Bank of Barclays Bank plc, and charities use a socially focused bank, such
Scotland (2 per cent), while HSBC below this threshold are served as CAF Bank, is very important.
has an 11 per cent share. by Barclays UK.” It ensures that there is a continued
Compliance with ringfencing
requirements from the start of this
year has undoubtedly been a major “ Compliance with ringfencing
undertaking for the main high street
banks. Leo Jones, head of charities requirements has clearly been a major
and not-for-profit organisations at
HSBC UK, says: “On 1 July 2018, undertaking for the high street banks ”
we successfully moved 17 million
accounts and 22,000 colleagues to The vast majority of charities and ongoing commitment to the sector
our new bank, HSBC UK, making surveyed this year have felt no impact by a bank that understands charities.”
from ringfencing beyond a change in Reliance Bank, which was founded
FIGURE 5: BIGGEST COMPLAINTS sort code, though a very small minority in 1890 as the Salvation Army Bank,
report problems including the loss of also gives its profits back to its charity
Withdrawal of services / facilities 18%
historic data during the transition and owner, in the form of either direct
Internet / online services 14%
a change in service levels. donations or retained earnings.
Low interest rates 14% The Co-operative Bank has just Unity Trust Bank is a commercial
Fees 13% a 1 per cent share of main banking bank with a social conscience,
Call centre / back-office support 6% relationships with charities with something that resonates with
annual income of over £20m. This charities, says its director of
Understanding needs of charities 6%
has gradually fallen over the last few commercial banking Steve Clarke.
Lack of dedicated contact 5% years from 6 per cent, likely reflecting “Every loan approved by the bank
Poor customer service 3% high-profile financial challenges and must deliver community, economic,
Change in relationship manager 2% the gradual shift of ownership from social or environmental benefit
Other 3% the Co-operative Group to private as well as meet our risk criteria,”
investors between 2013 and 2017. he adds.
No complaints 16%
The bank is keen to point out that, Triodos Bank only lends to or
while its ownership has changed, its invests in organisations that positively
FIGURE 6: IMPORTANT FACTORS ethical banking credentials have not. affect people’s lives, protect the
WHEN CHOOSING A BANK The bank’s ethical policy, introduced planet or build strong communities,”
Good reputation in charity sector 36% in 1992 and incorporated into its according to Paul Nicoll, social and
Internet / online banking 33% constitution in 2013, means it will cultural lending team leader at Triodos
turn down business from companies Bank. “Being ethical is at the heart
Historic relationship 32%
whose values do not align with its of what we do and is our main point
Competitive fees 29% own. Says head of SME Ryan Etchells: of difference for charities who want
Ethical / socially-responsible approach 28% “We are the only UK high-street to choose a bank that aligns with
Ease of access 27% bank with values and ethics embedded their mission.”
into our articles of association. Similarly, Charity Bank, which
Recommendation 17%
Our customers constantly reinforce is owned by charitable foundations,
Offers specialist charity services 16%
this as a reason they either continue trusts and social purpose organisations,
Range of services 13% or choose to bank with us. This will lend only to “charities, social
Attractive interest rates on cash deposits 9% is particularly the case with our enterprises and organisations tackling
National representation 5% charity customers.” social and environmental issues”.
The smaller specialist banks that
Credit rating 4%
focus on the not-for-profit sector OPEN BANKING
Sponsorship / support 1% enjoy a strong position in the charities Another government initiative
Other 2% market, albeit not in the large-charities intended to increase competition
Note: Respondents could choose more than one category segment, and have done a good job of and choice in the banking market is
© Civil Society Media Limited Charity Finance | May 2019 | www.civilsociety.co.uk 5SU RV EY BA N KIN G 2 0 1 9
Open Banking, which came into force
FIGURE 7: ETHICAL BANKING
in 2018 as part of the EU’s second
Payments Services Directive (PSD2). The importance placed by charities on ethical
Under the terms of PSD2, the banking has declined over the last few years
nine largest UK banks and building
societies are legally required to allow How important to you is a bank's ethical/socially-reponsible approach to its business?
customer account information to be Very important Fairly important Neither important nor unimportant
shared securely online with other Fairly unimportant Not at all important
2019 31 42 22 32
regulated companies, subject to the
account holder’s consent. 2015 34 41 20 41
The initiative is intended to 0% 20% 40% 60% 80% 100%
help account holders to access other
financial products and services (such How much do you value your bank's commitment to corporate and social responsibility activities?
as current accounts, cash management, Very important Fairly important Neither important nor unimportant
savings and loans), which may be more Fairly unimportant Not at all important
suitable for their needs based on their 2019 35 33 25 5 2
account history. The information 2015 42 39 15 22
sharing is facilitated by application
0% 20% 40% 60% 80% 100%
programming interfaces (APIs), which
enable different software applications Do you think that banking ethically would increase your charitable impact in the eyes of your
to communicate with each other. supporters and trustees?
Yes No
Banks interviewed in the course
2019 44 56
of this year’s survey are uniformly
positive about the benefits that Open 2015 58 42
Banking will provide charities. “We are 0% 20% 40% 60% 80% 100%
very much embracing Open Banking
because we believe these regulations
provide a unique opportunity to offer FIGURE 8: USE OF ADDITIONAL BANKS
our customers innovative solutions
that have not been possible before, Most charities use more than one bank
such as bringing all of their financial but not necessarily for deposits
information together in one place,”
says Jones at HSBC UK. Number of banks used in addition to the primary banking relationship
For their part, the charities surveyed None One Two Three Four or more
this year are largely unaware of 2019 45 30 13 9 3
the initiative. Of the 50 per cent
commenting on Open Banking, fewer 0% 20% 40% 60% 80% 100%
than 20 per cent give it a positive
Do you spread your funds across more than one bank to increase your
reception, with the rest expressing deposit protection insurance cover?
uncertainty or concerns over security Yes No
and privacy. It is a telling indication 2019 37 63
that increased choice – even if in the
0% 20% 40% 60% 80% 100%
interests of the consumer – clearly
does need time to affect behaviour.
networks by making services available in March and five more in London,
BRANCH CLOSURES via the 11,500 branches of the Post Manchester, Leicester, Crosby and
The most frequent cause for complaint Office, although the facilities offered Bristol are due to follow.
about high-street banks among the are limited.
charities surveyed this year related Reflecting the fact that this is an DIGITAL BANKING
to branch closures (figure 5). industry-wide issue, NatWest, Lloyds A more common approach to the issue
The number of UK bank branches and Barclays have teamed up to pilot of branch closures, however, is the
has declined steadily over the last 30 shared business banking hubs. The development of digital banking
years from 20,583 in 1988 to 7,586 hubs, which will be open from 8am facilities, both collectively by the
at the end of 2018, according to to 8pm seven days a week, have been industry and by individual banks.
figures compiled by Which? This designed to “enable businesses that At industry level, the development
is a particular concern for charities, manage cash and cheque transactions over the last two years of image-based
which frequently need to deposit to pay in large volumes of coins, cheque clearing, which enables cheques
cash and cheques collected via notes and cheques and complete cash to be deposited digitally and funds
shops and fundraising activities. exchange transactions”. The first hub to be cleared within two working day
Many banks supplement their opened for business in Birmingham rather than six, has been significant.
6 Charity Finance | May 2019 | www.civilsociety.co.uk © Civil Society Media LimitedS URVEY BANKING 2019
A number of the banks surveyed this Lloyds has measured the digital to online fraud. “Fraudsters
year are developing their own digital capabilities of SMEs and charities since target charities and educational
capabilities and encouraging take-up 2014. Last year the Lloyds Bank Business establishments because there are
by their charity clients. and Charity Digital Index reported generally high volumes of incoming
“Barclays has reintroduced the that “in 2014, 24 per cent of charities and outgoing payments and the use
business process review for new as and 8 per cent of SMEs were digitally of volunteers can mean that standard
well as existing customers, largely as excluded – in 2018, 99 per cent of procedures and protocols are not
a result of continuous change in the SMEs and charities are now online”. always strictly adhered to,” he says.
way day-to-day banking transactions According to senior relationship Sarah Smith, senior operations
are undertaken, particularly in the new director David Kearney: “Charities tend manager of CAF Bank, concurs:
digital arena,” says Nazreen Visram. to be late adopters of technology, so “Fraud mitigation continues to be one
“Examples of our recommendations have most to gain from this hands-on of the greatest challenges for charities.
when undertaking reviews with our approach to developing digital skills.” Sector wide, the numbers of fraud
clients include straight-through attempts are increasing, especially
[automated] processing of payments FRAUD AND CYBERCRIME around invoice and CEO fraud.
made, better use of lower-cost channels Intrinsically linked with digital “CAF Bank has introduced text
such as faster payments [which reduces banking is the need for protection alerts to further enhance our online
clearance times to seconds] and SEPA from fraud and cybercrime. banking security features, and is now
[single euro payments area, which According to Hutton at Lloyds, rolling out two-factor authentication
facilitates cross-border transfers in charities are particularly susceptible in the form of SMS or app codes.”
Europe], and improved integration
between the bank and back-office
FIGURE 9: BANK LOANS (PERCENTAGE OF RESPONDENTS
systems for reconciliations,” she adds.
Meanwhile, Hugh Biddell, head of
ANSWERING YES)
charities and not for profit at NatWest Charities’ appetite for borrowing is diminishing
and Royal Bank of Scotland (both parts
2019 2017 2015
of RBS Group), says: “Relationship
Does your charity 9
managers work closely with charities
currently have 11
to review their operating models
a bank loan? 16
and see how banking solutions can
be embedded into their processes If not, have you 9
to optimise efficiency.” considered taking 12
Following a successful pilot last out a bank loan? 14
year, the bank has recently launched Would you consider 9
NatWest APtimise, cloud-based taking out a loan in 13
accounts payable software that the next 12 months? 16
combines invoice automation and 0% 2% 4% 6% 8% 10% 12% 14% 16% 18%
payments to boost productivity
and optimise cash flow. Earlier this
year, RBS start a pilot of FreeAgent FIGURE 10: OVERDRAFT FACILITIES
accounting software via the Open Charities’ use of overdraft facilities is minimal
Banking platform to enable RBS
and NatWest customers to access How often does your bank use overdraft facilities on any of the accounts you hold with your main bank?
and integrate their banking data. Regularly Several times a year Rarely (For one off reasons) Never
“This initiative will help charities 2019 11 6 92
comply with the recent Making Tax 2017 2 2 7 89
Digital requirement,” says Biddell.
Lloyds Bank has invested 0% 20% 40% 60% 80% 100%
significantly in improving the digital
skills of its customers. In 2017, it met FIGURE 11: SOCIAL FINANCE
its target of recruiting 4,000 digital
champions to help 700,000 charities Only one in six charities actively consider social
and businesses acquire digital skills. finance as an option
According to area director for
education, charity and social enterprise Have you considered social finance as an alternative option to a bank loan?
Steve Hutton: “The digital champion Yes No Don’t know
2019 16 74 10
network has grown to 24,000 and
the bank is committed to training 2017 21 66 13
1.8 million charities and businesses in 0% 20% 40% 60% 80% 100%
digital skills between 2018 and 2020”.
© Civil Society Media Limited Charity Finance | May 2019 | www.civilsociety.co.uk 7The 2019 Banking Survey
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