The Community Bank model developed by Bendigo Bank is an alternative approach for providing financial services to rural and metropolitan communities – but why was it established? And how does it work?
Opening day of the Henty Community Bank
“The concept of shared value can be defined as policies and operating practices that enhance the competitiveness of a company while simultaneously advancing the economic and social conditions in the communities in which it operates.” … “Shared value, then, is not about personal values. Nor is it about “sharing” the value already created by firms—a redistribution approach. Instead, it is about expanding the total pool of economic and social value.” As they say CSV is about business strategy that “leads to a bigger pie of revenue and profits” where “the return will be greater economic value and broader strategic benefits for all participants” (all quoted from Creating Shared Value Porter and Kramer HBR 2011).
So let’s consider this in the context of the Community Bank branch banking model of Bendigo Bank. Firstly why was the Community Bank model established? What problem was it trying to solve? And how does it work?
Simply put, it was trying to solve a commercial viability problem for branch banking services in locations where branches were closing, as well as the resultant financial exclusion problem and its wider community impact. And as stated in The Melbourne Review article ‘The Perceived Impact of Australian Community Banks on Quality of Life‘ it works like this; “[t]o establish a community bank branch, a locally based public company limited by shares representing all or part of the local community, purchases the right to operate a branch of [Bendigo Bank]. The company secures the premises, purchases fittings and systems, and meets branch running costs. [Bendigo Bank] provides the banking licence, the bank brand, product development, systems, acquisition of requisite service support, and supports the branch with operational requirements. Local communities gain branch banking … [Bendigo Bank] gains access to, and support from, markets that might have otherwise been closed to them or not sufficiently large to justify independent investment. In addition, the charter of each community bank makes a firm and explicit commitment to community support, welfare and development. A proportion of the after-tax operating profit of each community bank is distributed back to the community to support, sustain and enrich community life and enable community development.”
So that’s the model. Has it enhanced the competitiveness of Bendigo Bank?
The bank certainly thinks so. As stated in its 2014 Results presentation Bendigo Bank has a ‘valued and unique customer proposition’. Also note the concluding comments of The Melbourne Review article that the model provides “a comparative positioning advantage over more conventional banks”, and comments of international brand agency Interbrand that “Bendigo’s market share has been largely driven by the publicity surrounding its community bank positioning”.
And has it expanded the total pool of economic and social value? In terms of business for Bendigo Bank, over 300 Community Bank branches manage over 1 million new customers to the bank reflecting over $25 billion of banking business. In terms of social value as well as the local branch banking services, there’s over $125m distributed back to the community. As stated in The Melbourne Review article there’s also a perception of community banks providing shared sense of community well-being. And other similar research has found an enhanced sense of unity resulting from the establishment process; increased confidence in the future of the community; and a positive effect on social dynamics.
The bank’s unique Community Bank® model is, in its own words, “Good for business, Good for community”. A leading example of CSV in practice.
However, whilst CSV is a new business concept, many have commented that it is rooted in old values. And whilst the Community Bank branch banking model is (relatively) new (now 16 years old) it too is rooted in old values. These ‘old values’ are well reflected in the closing remarks of the bank’s CEO at last week’s AGM when, reflecting the bank’s sense of responsibility to all stakeholders, he said, “Finally, I’d like to thank all the participants in our business for the part they play in our success. Our staff, about whom I have already spoken; you, our shareholders, who continue to support us whenever we call on you; our suppliers; our partners – and again I stress how our business cannot thrive without them; and of course our customers, without whom we don’t have a business. We have a deeply held philosophy that each participant should share in the success of our business, no matter the part they play. This is incredibly important and we spend a lot of time trying to ensure we get the balance right between participation and reward”.
Sam Moore is Head of Community Bank® Model Development at Bendigo and Adelaide Bank.
For more information about Bendigo Bank’s unique Community Bank model please follow this link. For more commentary on the Community Bank model as a shared value strategy, see Sam Moore’s posts on www.sharedvalue.org.
