Pandemic Perspectives with Peter Burrows
14 August 2020 • Corporate • Our Insights
Peter Burrows, Chief Executive of The Cambridge Building Society took part in the informal online chat series ‘Pandemic Perspectives’ last week hosted by Gareth Jones from ICAEW East Anglia. The conversational series invites senior finance leaders working in financial organisations across Cambridgeshire to share their unique COVID-19 business experiences. Peter gave an insight into how the pandemic has changed the way mortgage and savings customers interact with The Cambridge, how necessity created a successful working from home model transformation built on pre-existing relationships between internal teams, and reflected on how the pandemic allowed for time to focus on the sustainability of The Cambridge as a thriving, independent, mutual business.
What impact has the pandemic had on the financial services sector?
The first thing to say is that we don’t know the full impact yet, I’ve got a sneaky suspicion there are a number of chapters left to write in this story. The impact so far on the financial services sector has not been as severe as it has on some other sectors. The most obvious thing that has happened is the Bank of England Base Rate has been reduced to the amazingly low level of 0.1%. The impact on Corporate is that it does begin to create an extremely low interest rate environment, this impacts the big banks first but gradually flows to the wider economy. In terms of what it means for consumers, if you have a mortgage you’re probably paying 2% as rates are coming down. In the savings and investment market, we seen rates come down even faster. Unless you’re prepared to tie your money up for a certain amount of time, you’re probably earning a very low percent. One final point on the market in general, with the whole country going through a lot of change as a result of the pandemic, fraudsters are even more active than normal. The Cambridge has seen higher levels of attempted fraud and unfortunately we’re all a little bit more vulnerable at the moment. Stay on your guard in these unusual times.
Given the level of uncertainty around interest rates, do you think it’s going to be enough to get the economy moving?
It can’t do any harm but at the very start of this crisis, I think the Bank of England was quite concerned about people struggling and having to dip into their savings. We haven’t seen a similar impact to the banking crisis of 2008, the savings market has been exceptionally stable. Because people are at home, we have seen consumer spending fall quite a lot, and that does challenge the economy and the country’s recovery from the pandemic. I would guess that’s what’s fuelling a number of messages coming out of central Government encouraging us to increase our spending in the retail and leisure sectors.
What impact has the pandemic had on The Cambridge over the last five months?
We are a business of around 200 people all based in Cambridge, two thirds of our employees are based in our Head Office in central Cambridge and the other third are based in our branch network. It’s had a big impact on our operations and operating model, we have never really had a need to be a home working organisation. Being a financial services business, we have a number of things that make that quite tough. We’re very conscious we’re dealing with customer data and it’s much better to have that centralised, rather than it being disaggregated. We also have things like call recordings in place when we’re talking to customers in our Customer Contact Centre, it’s easier to administrate in one centralised location as opposed to peoples kitchens or dining room tables. The Cambridge, like everybody else had to face the challenge of lockdown and we absolutely transformed the business. It’s an overused word in change management but there’s no other word for it, we absolutely had to transform our business in short order. It’s a credit to all of our people that we are now a business that does not have a Head Office in Cambridge in the way that we used to, but instead now has a branch network supported by Head Office people working remotely from home electronically. The single most impressive thing about that is that we had customers calling us pre lockdown and once lockdown had been enforced, telling us that they hadn’t really noticed a difference. It’s been largely seamless and I for one would have probably been in the camp of people saying we couldn’t have done it. Necessity is the mother of invention and we were forced to do it, we executed the transformation very successfully.
We are an independent mutual business and we’ve seen the impact from the perspective of our members. Some of our mortgage members, people that have borrowed money from us, began to face financial difficulties as their revenue streams started to dry up. Either as a result of reduced earnings or being placed on furlough. In the early days of lockdown, the response from the industry to people facing these kinds of difficulties was to consider a three month payment holiday on their mortgage. The Cambridge decided to go above and beyond that a little bit because we wanted to make sure that if any of our customers were in difficulty, we would have a proper conversation with them. We didn’t want to offer a two minute process, we wanted to have an in depth conversation about how we can best support our members. A number of people came out of it with three month payment holidays, and that was right for them. Other people have been able to take out new mortgage products to get a better deal. Some people have been able to completely restructure their personal finances to make sure they had the most efficient and effective setup for them. That placed an operational strain on us to be able to have those conversations with our customers but I think it was the right thing to do. We were prepared to take that challenge on the chin.
Has there been an impact on the product lines at The Cambridge?
Not particularly, no. We are a relatively straightforward business and we only do two things. We lend money to people to buy homes or we take their money on deposit and pay them interest. We have seen a change in the preferred way that our customers want to interact with us. Part of that was forced by way of lockdown but we have found that when people have gone through that different ways of doing things hurdle, a number of people are choosing to stick with it. We are seeing a shift in the way that our customers are choosing to interact with us either online, on the app or on the telephone.
What elements of this transformation do you think will stay when we return to normality, can you put the genie back in the bottle?
That’s a really good question. I think you have to look at it from both the perspective of our members and our employees. It’s arguably still early days but we reduced our branch opening hours severely during lockdown as did most other financial services organisations. We’ve now got the every location open for the majority of every day to our customers, for the most part but on slightly reduced hours. If anything, we went a little bit extra because we were really trying to protect a number of our team members. We are still not seeing the transaction flows coming back and we are still seeing the majority of transactions happen on the phone, online or via the app. Our average call volumes each week are more than 50% more than they were prior to the pandemic. I can’t see that going back to ‘normal’ but we are going into a ‘new normal’. Whether it stays in the configuration it currently is or whether it’s back a little bit closer to how it used to be, I don’t know. I think people have made the leap from a physical into a virtual interaction space and I think a lot of people will choose to stay there.
On the side of our people, having now proved that a home working model is possible, I don’t think many people would choose to work from home 100% of the time going forward. Dare I say, if we’re in a post pandemic world I don’t think many people are going to choose to work in the office five days a week. I think most people are going to want to work a blended pattern, of course that creates an entirely different dynamic for work equipment needed and office configurations, in terms of physical infrastructure. I think one of the reasons that working from home has been so successful for us is because we have lent on the relationships and trust that we have built up through the years of working in the office. I think it’s a different proposition altogether to join a business and go straight into a work from home model without having the ability to work alongside people in an office to build those relationships. The informal conversations that spark thought aren’t there when working from home. I think we can do without for a period of time but I wouldn’t like to lose them forever. I think we’re all missing out a little and we all benefit from informal input from others. I would be one of first to admit that I’m one of the people struggling most to stay motivated and energetic at home because in my role I don’t have a set agenda. My role is about the general health and sustainability of the business and part of doing that is having my ear to the ground, having varied conversations with a range of different people over the course of the week. Pre lockdown I would engage with team members in the office and by popping into the branch and stores, you really get an up to date feel for how things are ticking over. I’m finding that a real challenge when I’m stuck in the same 10x10 box in front of a screen every day, trying to tap into culture from a distance.
Everyone has been firefighting the pandemic with regards to the immediate future, have you considered the long term impact?
Yes, but in a peculiar way. We were so focused on the here and now for a period of time this year that it actually reminds us of a few basic lessons. For example, the importance of being really clear on our priorities. It’s been frustrating to have a relatively narrow focus for a while but very early on in the pandemic The Cambridge identified its priorities. Our three main objectives were to look after our people, look after our customers and to take care of the long term future of the business. When you write basic messages so clearly and so starkly, it gives everyone in the organisation a very clear agenda to work to. Whilst I’d like to be thinking broader and more strategically about 2021 and beyond, we are beginning to do that but not to the same extent as we might have done in a normal year. It’s been a salient reminder that when you’re thinking about the future, if you can boil it down to some really clear priorities that everyone can get behind, that’s a good lesson we can take from the pandemic.
It’s also taught me that you can have the best plans written down, you can have the best processes, the best IT but at the end of the day when it really comes down to what makes a difference is the people. In terms of ensuring you have a capable organisation, it really does boil down to the group of people you have around you. Because of our peculiar status as a highly regulated financial services business, we actually did have a pandemic plan and it was signed it off as recently as November 2019. There were elements of that which were useful and we’d been through that thought process to put us in good stead, but what really made the difference during that ‘make or break’ first few weeks of the pandemic with regards to how we were going to respond and what we were going to do, was having capable and committed people. That’s the number one thing you can do in terms of ensuring that you have an organisation that’s fit for the present and fit for the future, is by making sure you have a decent group of people around you. That’s a lesson that will stay with me forever.
The majority of your branches are in the Cambridge area, is this the same for your customers?
We are a Cambridge business and we always have been. The vast majority of our mortgage customers are based in and around Cambridge and that’s as far as our branch network extends but that’s not quite true for our savers. The savings market very much opened up a number of years ago and people are very keen to shop around and find the best savings rate deal they can. We’ve been accepting savings customers from outside of Cambridge and East Anglia for some time now. Prior to lockdown, we decided to make our mortgages available beyond our usual County boundaries. We’re not pushing that hard and we certainly have no intentions of establishing branches elsewhere in the country but we we’re finding that increasingly, potential customers were coming to us and we were turning them away for no good reason other than they had the wrong postcode. We felt it wasn’t the way to run a 21st Century business. We had established all the processes we needed to enable us to deal with customers from all across the country. I’m really pleased that we had done that prior to the pandemic striking because I think it’s going to be even more important as we start to come out of lockdown measures. We’re able to deal with and service customers from anywhere in the country. In a nutshell, our strategy is to maintain our identity as a local business but we are not going to turn good customers away if they want to come to us from anywhere in the country. We’ve certainly proved we have the IT infrastructure to function now and to be able to deal with customers very effectively.
How has COVID-19 affected the local housing market?
It stopped it, frankly for about three months. Our new lending was very close to zero during March and through to the beginning of June. We just need to take that on the chin, I’d rather we had been able to keep our business going during that time but like most others we just have to cope with that impact. How it’s going to change longer term remains to be seen, the volume of housing market transactions since lockdown restrictions were lifted has really started to flow back. We’ve seen a real unleashing of pent up demand but I think it is too soon to say how house prices might track. I think the market has picked up a bit but it wouldn’t surprise me to see house prices fall year on year. A lot depends on whether we get a local or even national second wave of lockdown measures. Moving homes takes a lot of physical interactions, not least taking a day to pack up, loading a van and moving into your new home. With a pandemic, the housing market really cannot function. Whether or not there’s a second wave later this year really makes a difference in terms of how we perform through that.
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