This year The Co-operative Bank celebrates its 150th year of providing ethical banking services.

Born out of the 19th Century Co-operative Movement, its ethical policies ensure it retains a “unique” place in the UK banking market, according to Catherine Douglas, its managing director for SME.

“The Co-operative Bank is very different from other banks,” Douglas tells BusinessCloud. “We know that’s why a significant proportion of our customer base are with us.”

Back in 2019, while the bank served 86,000 SMEs, 750 co-operatives, 5,000 charities and around 200 credit unions with business accounts rated 5* by Moneyfacts, it lacked a mobile banking platform. In May of that year it was awarded £15 million as part of the RBS alternative remedies package from Banking Competition Remedies’ Capability and Innovation Fund, specifically to improve and expand its offer to the UK SME market.

BankiFi partnership

Committing £17m of its own funds to the same cause, it worked with fellow Manchester company BankiFi to develop both a mobile banking platform for its SME customers and a standalone app, Incomeing, for use by customers of any bank.

BankiFi specialises in payment processing and financial administration services for SMEs, with the aim of embedding banks within their customers’ daily workflows. The Incomeing platform takes advantage of open banking request-to-pay technology to equip SMEs with a tool for instant payment and links into major accounting packages to make invoice creation and reconciliation seamless.

“Incomeing is a co-branded service which makes it easier for businesses to get paid,” explains Douglas, who joined The Co-operative Bank in October 2020 following 12 years at Santander then TSB Bank. 

“Once a job’s done, you can send the invoice immediately and get it paid. The money isn’t being held anywhere – it’s transferred directly into your business account.”

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Late payment of invoices is a huge problem for the economy, causing 50,000 SMEs to go out of business every year. The average size of late payments owed to SMEs in the UK is £6,000, with estimates putting the total owed at more than £50 billion.

“Cash flow is the most critical aspect of running a successful business. Unpaid invoices are one of the biggest issues that SMEs face – and that has heightened through the pandemic,” says Douglas. “By developing tools like this, we’re hoping that we make that collection of payments much easier and less time-consuming.

“Our strategy across the bank is to work hard at solutions that make things easier for businesses – and especially for our customer base of small businesses. We appreciate that their day is spent on their passion – such as joinery or hairdressing – and we need to make the admin and the banking transactions as automated as possible. 

“If their passion was to be an administrator, that is what they would be doing for a job!”

Co-development deal

Late last year The Co-operative Bank committed an initial £500,000 to a new co-development deal with BankiFi. The bank will be the first to take any newly developed products to market, with those services then made available to banks and their SME customers worldwide once a period of time has passed.

“The mission of both The Co-Operative Bank and BankiFi is to help solve the late payment problem. We are both purpose-led businesses: our values and ethics are aligned. I think that’s really important,” says Douglas. 

These types of collaborative partnership are the way forward for financial services. Because we’re an established bank with processes and procedures in place, that maybe helped BankiFi – but BankiFi has definitely helped us to think differently and do things quicker than maybe we would be able to do as a traditional bank. 

“The challenge is now getting customers to use the services. Like with everything, it is key to get the message out there to help customers understand how this could genuinely help them.”

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BankiFi founder and CEO Mark Hartley describes its relationship with The Co-operative Bank as “incredibly important for us”.

“The Nationwide Building Society is an investor in our business and The Co-operative Bank is our flagship customer. That’s not a coincidence: we want to be associated with banks that do the right thing,” he says.

“With Incomeing, the whole Co-operative Bank board got right behind doing the right thing for small businesses just as COVID was starting to take hold. From the outset, they had a refreshingly open mind to the service not being available to just Co-operative Bank customers, but to everyone.

“They’ve got a very strong relationship with the Federation of Small Businesses, which was really helpful for us.”

FSB partnership

The Co-operative Bank’s partnership with the FSB includes provision of a bespoke bank account for its SME members while it also funds ‘The Hive’ – a co-operative development programme run by Co-operatives UK that provides new business support for people looking to start or grow co-operative or community enterprises via a mix of online resources, training and advice.

“The overarching strategic aim is to be the bank of choice for ethically minded SMEs,” says Douglas. “We want to continue to modernise our banking proposition through digital service enhancements, product development and personalised business support.

“If they hit a tricky spot, how can we get them through that financially – but also prepare for any future aspirations they have?

“Business is my passion. I love working with business customers. I love to be able to help customers through what I do at the bank to try and prosper and grow so that they’re a key part of the economy. 

“We’ll always need businesses to help us – so if we can help those businesses thrive, then that’s what I want to be able to do.”

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