What Asian banks can learn from Metro Bank's Chairman

The New Bank on the Block: Lafferty spoke with Anthony Thomson, Metro Bank

While the industry continues to debate whether retail banking should be separated from investment banking, we decided to have a conversation with Anthony Thomson, co-founder and Chairman of Metro Bank, the first new High Street bank in the UK in the past 150 years.

(This is an extract from that interview which is supplied in full to subscribers to Lafferty Retail Banking Insights.)

Having started with four stores in 2010, the bank currently has 12 “stores” (branches) around London and is aiming for more than 200 locations by 2020. Its success to date has been its concentration: it is a pure retail bank, (if ‘retail’ is defined as a bank that operates in the high street and does business with consumers, SMEs and corporates) funded by deposits and focused on customer service and the customer experience.

It is in many ways more retail than bank, which after all, fits Mr Thomson’s background. Although he has nearly three decades in financial services marketing, he had never before been a banker. This might not signal a trend, but it does offer important and interesting lessons.

The approach is very different
We know that sectors with more enlightened marketing can be, and should be, good for the customer. In late 2001, Anthony met Vernon Hill the founder of Commerce Bank in New Jersey and was very impressed by a bank that had one of the highest customer satisfaction ratings of any business in America, not just banks. Anthony saw this as a real opportunity.

Metro Bank is predicated on a belief that if you give customers a better experience they will give more deposits, accept a slightly lower rate and stay with you for longer.

The plan was to open two stores in the first year and four in the second and grow from there, but the public acceptance was so dramatic that as we sit here in June 2012, there are 12 stores and a little over 80,000 customers. Roughly 2,000 new customers join a week and the plan is to open one store a month.

Antony is not a banker by background so he doesn’t think like a banker - he looks at this as any other retail business. So it is a very old-fashioned banking model based around customer service and customer experience -- building relationships with customers on both the retail and commercial side, and lending a portion of the money that comes in.

So what is special about Metro and how it operates
When Metro was launched, a journalist asked Anthony, in all seriousness, “Is your point of differentiation the fact that you have dog bowls and dog biscuits?”. The response was “Absolutely. You’ve seen right through me. Nobody else could copy those 50-pence dog bowls or dog biscuits.”

Of course, anybody could copy that. But what they couldn’t copy was what underpinned that, which was that, unlike any other High Street bank, Metro let you bring your dog into the bank and if it pees, or something worse, which is what dogs do, the staff don’t mind.

“It’s a statement that we care more about you as a customer than we do about us as a bank. We really do put our customers first and the dog bowls, the dog biscuits, the early openings, the late closings, the instant decisioning, instant card issuance, are part of a hundred or a thousand things done better rather than any single point of differentiation.”

He continued “It’s really about three things: creating a differentiated model; creating a culture that aligns to the model; and relentless execution. Ours is a very simple value-based proposition, service and convenience.”

Staffing
Metro is very proud of its staff and pays a lot of attention to the type of people it employs.

The vast majority of those in head office are from banking backgrounds because they need the banking skills. In the stores themselves around 50 percent are from a banking background and 50 percent from a non-banking background because Metro recruits for attitude and trains for skills. It wants people who are committed to giving great customer service.

The products on offer
Metro offers all the classic asset/liability products you would expect in a High Street bank. Current accounts, site deposits, turn deposits, savings products on the liability side for consumers.

Unsecured loans, typically credit cards and secured loans, typically mortgages on the secured side. It has a similar mix on the commercial side with the addition of cash management which is obviously important to businesses. What it doesn’t offer is any investment products; it is purely a traditional bank.

When asked “What do think about the current state of High Street banking in the UK? Have banks ever been in so much conflict with customers than they are today?

Anthony replied:
“All the entrepreneurs I know that go into business and become successful, don’t go in to make money. They go in because they have an idea, better service or better customer experience, the by-product of which is making a profit. I think a lot of businesses today, including some High Street banks have forgotten profit is a by-product of doing something well for the customer.

Some banks got themselves into a terrible mess by rewarding people for making loans rather than the quality of the loans. But they’re in a tough situation. They all have to deleverage their balance sheet massively. Deleveraging a balance sheet in the service business means reducing people because it is the major source of cost, which will lead to further degradation of customer service.

We’ve seen that every day, closure of branches, reduction in head count, and reduction in service to customers, which drives customers to automation, whether or not they want to. Automation is important to have; we have ATMs and internet banking. But the choice of whether or not to use it should be that of the customer, not us forcing them down a channel because it is cheaper for us to manage.”