Nationwide was the first UK financial institution to offer online banking and the first to be an internet service provider. It is experimenting with the use of iris recognition to improve security at cash machines. (The service matches customers' eyeballs with photos of their eyeballs.) It was an early user of multimedia kiosks in its stores and a pioneer of the drop-in branch, which focused as much on selling additional products as conducting transactions. It also broke new ground in offering euro currency mortgages at lower interest rates.
Much of the explanation for this apparent contradiction lies in the fact that Nationwide's chief executive, Brian Davis, formerly the company's IT director, is one of two technol-ogy specialists on the board - the other is IT director Bernard Simpson. As a result, the society rejected the option, adopted by many competitors, of outsourcing the IT function.
"If you think about financial services, it is all basically computer records," says Davis. "To outsource what is to all intents and purposes our core activity seems rather strange to us. We don't want to lose control of what we do. It is very important for us to be able to adjust the priorities on where we put our IT resources. Because Bernard and I have this IT background, it is possible for us to see it as an investment, not as a cost."
The IT influence can also be seen in the successful sponsorship of first the Football League and then the English and Scottish national teams. The League's internet site is one of the most heavily used in the UK and contains hyper-links to Nationwide's own web pages, which has led to a big increase in the number of hits on Nationwide's site.
Nationwide is taking a very different approach to the internet from that of Prudential's Egg, which has become the UK's first internet-only bank. Egg claims that the savings of doing business over the internet instead of over the counter - each transaction is 100 times more expensive at a branch, according to US experience - will help it take market share from the established banks and building societies.
To Davis, however, the internet is more important in terms of improving access to services, offering additional delivery channels, than as a means of cutting costs. "We have this acronym, "prais", which represents the things that customers worry about when they buy something," he explains. "Price, Range of products, Accessibility, Image and Service. Now, if you look at those and ask how you keep improving them, then several of them - particularly access and service - are very much dominated by new technologies. So if you are not pretty upfront with those, you are going to lose out in a major way.
"There is more and more choice being demanded in access by customers," he adds. "Almost any way you want to do it we have to provide: branches, call centres, internet, post. But we have to translate different background systems into different front ends. We are able to conceptualise that and translate that into technology because we are used to doing it. We have very good technologists. We employ good people."
The challenge facing businesses, he believes, is spotting which technology is the equivalent of VHS and which is the Betamax, while spending the minimum on research costs.
He will not be drawn on how Nationwide will evolve as an internet service provider (ISP), although he does predict that many of the 250 or so British ISPs currently around will collapse before long. Too few of them have a clear strategy for making money out of the business, he believes. For the Nationwide, on the other hand, being an ISP can be justified as offering members another service.
"We're in the middle of a revolution. The danger of any revolution is that there is a lot of blood on the floor. We don't want to be associated with any of that."
But there is also a revolution taking place within the mutual movement, and Davis sees himself in the lead here, too - as a moderniser of mutuality. Last year he fought off an effort at demutualisation led by the flamboyant carpetbagger Michael Hardern. This means there can be no new attempt to demutualise Nationwide until 2001 - despite rumours that Virgin's Richard Branson might seek a directorship on a demutualisation platform.
On Wednesday, Nationwide showed how well it is performing in its current guise. It reported a gain of 10.5 per cent in pre-tax profits to pounds 407.5m for the year to 4 April. Members, Davis said, enjoyed an "annual windfall" through reduced borrowing costs and mortgage rates resulting from the fact that Nationwide pays no dividends to private shareholders.
Discussing mutual societies, he says: "It is the same, I suppose, as with trade unions. The trade unions' original purpose was to stop workers being exploited. The workers aren't exploited in that sense any more. But there are other aspects of the workplace, like health and safety, where unions can quite usefully, perhaps, provide a role. But they have to change. And we have to change. We don't have this old-fashioned concept of a building society - we are New Labour. You just have to revitalise."
Indeed, Davis urges New Labour to take a leaf out of the Nationwide book. He wants the Government to put IT-literate people at the heart of its policy making. "If I were prime minister, that is what you would see as my strategy," he says.
Paul Gosling's book, 'Changing Money', pounds 14.99, is published by Bowerdean on 17 June.Reuse content