'Time to stop banks ripping-off Britain'

Philip Williamson, new chief executive of the world's biggest mutual society, reckons anything banks can do they can do better - and at far less cost. William Kay reports on the success of his 'all in this together' philosophy

Philip Williamson, the chief executive of Nationwide building society, is bidding to be a latter-day version of George Bailey, the building and loan association boss immortalised by James Stewart in the film It's A Wonderful Life.

In his first major interview since he took over this year, 54-year-old Mr Williamson said, in an echo of George Bailey: "We're all in this together." Naturally, Nationwide is in a far healthier state than the classic film's Bailey Building and Loan, but Mr Williamson has decided the same principles will do very nicely for Nationwide. "We regard Nationwide as a club, and it's important we treat all our members fairly," he said.

It sounds simple, but that is how Nationwide intends to differentiate itself from the competition, which Mr Williamson regards as the main demutualised building societies such as Halifax, Abbey National and Bradford & Bingley. The clearing banks, including Barclays, HSBC, Lloyds TSB and Royal Bank of Scotland, have less interest in the mortgage market, but nevertheless he is targeting their current account and credit-card offerings.

After a year in the job, the youthful-looking Mr Williamson has decided to major on Nationwide's unique selling point, its mutuality, and the better deals it offers customers. In other words, he is appealing to their finer feelings, but is selling Nationwide on the better deals its mutual status allows it to offer because it does not need to keep shareholders happy as well.

And Mr Williamson, a soccer-loving Liverpool fan, loses no opportunity to put the boot into his opponents' weakest points. "Here we are in the year 2002, the age of consumerism," he said. "The Consumers' Association has never had a more powerful voice, and Tony Blair and his colleagues don't want a Rip-off Britain. They want a Britain that is open, honest and transparent, and that's what we believe we can bring to the market.

"A lot of providers give their customers poor value. They rely on inertia and they are not totally transparent with the terms and conditions of their products. These features unfortunately still exist in UK financial services. There is an opportunity for people like us to say, 'Hey guys, come on, we can do better than this'."

Mr Williamson, the society's former marketing and communications director, had hardly got his feet under the chief executive's desk last winter when he was faced with his first big decision: whether to accept the Financial Ombudsman's verdict that Nationwide had acted unfairly in charging 400,000 borrowers higher interest rates than others. He not only bowed to that, but at a cost of £90m, compensated everyone affected, not just the ones who had complained. He said: "We felt we'd done the right thing in the first place, but the Ombudsman is effectively the referee. We didn't think we'd committed a foul, he did. So what do we do? Do we take the law into our own hands, or do we say: 'OK, we'll go with your judgement'? We had a choice there. We could have done what most of the field did, and that's keep your head down and let people complain individually. We decided to treat people fairly. We are the only player that did that. We had a choice to do the right thing or the wrong thing, and in my view we did the right thing."

At the time, HBOS and Abbey National were heavily criticised for insisting on compensating only those borrowers who complained, a policy they have maintained.

Another fight Mr Williamson has taken on is the government's CAT – charges, access, terms – standard for mortgages, pointing out that out of 4,000 different mortgage products available in Britain only 50 meet the CAT standard. "Why is that?" Mr Williamson asked. "The CAT standard hurdle is very high. It doesn't mean you can't do better than that, but if you want daily interest, fully flexible features, no mortgage indemnity insurance, none of the whole package of fees and charges, and you're a consumer who's bewildered by all this, you can get good value from a CAT standard mortgage. Customers appreciate being treated fairly. But CAT-standard products have to apply equally to all people. You can't have a special deal for one group and not for another group."

This has been a long-running source of anguish in the saving and borrowing market, because most providers offer their best deals only to new customers, leaving existing ones languishing in out-of-date products. In April last year, Nationwide decided there was more mileage to be had in treating everyone the same, and committed themselves to operating that policy for at least three years.

"We are unique," Mr Williamson said. "If you go into a Nationwide branch you can have anything on the shelf, whether you are a new customer, an existing one or a remortgage one. Nobody else can say that. Historically, our customers were saying, 'I've come to the end of my two-year deal, what can I have?' We'd say, 'You can have this one' and they'd say, 'Actually, I'd like one of those because it's better', and we had to say, 'They're only for new people'. So here am I, I've been a customer for 10 years, I'm a loyal, supportive member of the Nationwide club. Is it fair that a complete stranger can come in and get the best thing on the shelf? That is inherently unfair. We felt we were big enough and strong enough to put a stake in the ground and give it a try. When we made that decision, a lot of people said it will never work, you can't compete. But our business performance this year has been outstanding, and it is going much better than planned. We're retaining more people, and that's a challenge in the year 2002."

One of the problems of remaining a building society is that Nationwide – the world's biggest mutual organisation – is still associated in peoples' mind purely with savings and mortgages, and Mr Williamson is keen to demonstrate that these days the society offers the full range of financial services, competing on all fours with the retail end of the big banks.

"We can do anything a traditional clearing bank can do," he said. "So we hope people will come to us for personal loans, credit cards and current accounts, and we offer very good value.We have a life company, but 99.9 per cent of its business is with our existing members. We don't have solvency issues, we don't have a with-profits fund, we don't have all the baggage of the problems facing insurers. In recent months, we have been taking about 15 per cent of the Isa (individual savings account)market."

He sees an opportunity to embarrass the competition over their hidden charges on credit cards by lobbying the House of Commons Treasury select committee to outlaw the more aggressive ruses.

Mr Williamson said: "If you use your Nationwide credit card abroad, say in the US, we don't charge you any currency levy. If you use a Barclaycard in the US you pay 2.75 per cent. Do people know that? I don't think they do. And if you borrow money on your credit card, some companies use your monthly payment to pay off your least expensive debt first: we use your money to pay off your most expensive debt first. We think that's fair, so we are working with some of the Treasury select committee to make this a requirement because I think consumers are being treated unfairly by some of their providers. I don't think they know what's going on."

Nationwide's "Fly us – we're fairer" strategy seems to be working. It is now second only to HBOS as Britain's biggest retail savings institution, with a massive 14 million accounts and a presence in one of every four households.

"This is a club," Mr William-son added. "A young couple in Blackburn wrote to me recently, saying they felt compelled to say what good service they had had from their local branch of Nationwide. Then they went down to his parents in Sittingbourne, in Kent, told them and the next day they went into their local Nationwide branch and remortgaged. That's the effect we are having."