The news that Barclays is now investing money and knowhow in credit unions suggests that some of the objectives set out in our Re-banking UK report may be achievable without legislation, as we suggested.
Barclays is to let credit union customers use their Pingit technology and their branches, which is an important breakthrough.
Given that the big banks now control, not just the payments system, but also around 85 per cent of the domestic account market, this may be the only way of achieving the objective. It is hard to see how any government could provide banking services for the unbanked without the major help from the big players.
The problem with this argument is that it doesn’t apply in quite the same way to the small business market.
Project Merlin and other initiatives were designed to funnel money through the big banks and their branch networks to reach small business. The problem was that they no longer ran networks which could reach small businesses. They were no longer part of the capabilities or the business plans of the Big Four.
But the Barclays link-up with credit unions does give us a glimpse of one way forward. The big banks will provide the money and the knowhow for a new partnership between themselves and the new community banking network.
This could be enforced by legislation, as it is via the Community Reinvestment Act in the USA. Or it could be outlined in Parliament and then be acted on voluntarily by the banks, under their own auspices, as they did with the new transparency about where they are lending money, thanks to Lib Dem peers in the House of Lords.
The voluntary approach, if it is possible, would be far more effective and work sooner.
It would unleash the funding and the knowhow we need to build the kind of community banking sector that most other nations in Europe have. The lack of it here means that we are now the only European nation, apart from Hungary, where small business lending has not recovered to its pre-2008 level. These things matter.
There are of course objections likely from the banks. Why should they? (Because the current situation is corrosive and unsustainable). Why should they create potential competitors? (To avoid the alternative: break up by competition regulators).
But there are reasons why they may want to do this as well. It will mean avoiding legislation that would force them to. It will also mean they can put an end, once and for all, to the accusations that they are not lending enough to small business. It will be a boast they can fling in the faces of their critics who say they are overpaid and corroding the real economy around them.
In short, the Barclays link is important and may prove to be a template for something much bigger.
It only takes one of the Big Four banks to shift their position on this – rather as the secret manoeuvrings and negotiations hosted by Consolidated Goldfields helped bring an end to apartheid in South Africa.
It looks as though Barclays may be the Consolidated Goldfields of banking.