By Nigel Hill,TLF Research
A few days after Metro Bank celebrated its first birthday, I walked into its Holborn branch to interview Chairman and co-founder Anthony Thompson. Outside, with its bright red and blue livery, and inside with smiling staff quickly walking over to greet me and offer assistance, it didn’t seem like a bank but more like a hotel reception or up-market retailer. Close to where I was met was the Magic Money Machine, a child-friendly incentive that swallows up unwanted coins in exchange for notes. Staff were not behind bullet-proof glass but were accessible, friendly and customer-focused.
For 10 years up to 1997, Anthony Thompson had built City Financial Marketing into Europe’s biggest financial services marketing agency prior to selling the business to Publicis. In 2000 he founded the Financial Services Forum, an independent, member-based community for senior executives involved in financial services marketing. Whilst running the Financial Services Forum, Anthony heard about Philadelphia-based Commerce Bank which, compared with the banking industry generally, had a unique customer-focused strategy. Commerce Bank had built its entire business model on delivering a great customer experience.
Commerce Bancorp was founded by Vernon Hill in 1973. He based its business model on the Burger King franchises that he already owned. Flippantly dubbed Mc-Bank by some, Vernon Hill used his knowledge of the highly competitive and customer-focused fast food industry to revolutionise retail banking. In effect he developed a completely new style of retail banking that would rely on service rather than interest rates to attract customers and deposits.
Commerce Bank’s philosophy was that they were retailers, not bankers. They called their branches stores and its service proposition included such retail-style benefits as:
- Fast food opening hours – all day, 7 days.
- Drive-thru banking.
- Instant creation of ATM cards on the spot at the time of account opening.
- No overdraft fees on debit card usage.
- Free "Penny Arcade" coin counting machines for both customers and non-customers.
- No-Fee Visa Gift Cards for customers.
- Lollipops and dog biscuits in the lobby and drive-thru.
- Foreign ATM fee reimbursement (if the customer maintained a daily balance of $2,500 through the statement cycle).
- "No Stupid Fees, No Stupid Hours" pledge.
Commerce Bank's business model generated almost a cult following in the East Coast areas where they had stores. Commerce offered its customers merchandising giveaways such as coffee mugs, pens and pencils. In 2006 alone, its stores gave out 28 million free pens. It soon became one of the fastest-growing banks in the country. Having started with one store in 1973, the company had over 500 when it was bought by TD Financial for $8.5 billion in 2007.
The Launch of Metro Bank
By the time of Commerce Bank’s sale, Anthony had become very close to Vernon Hill and before the end of 2007 the two had reached a decision to launch a bank in London based on the same customer first philosophy. It took until March 2010 to secure all the necessary authorisation by the FSA but on 29th July 2010 the first new UK bank to be authorised for over 150 years opened its doors on Southampton Row in Holborn. With £75 million in capital invested by Vernon Hill and Fidelity amongst others, it was estimated that this would support the company for up to three years and 24 branches before breakeven would be achieved.
Metro Bank launched with retail convenience, transparent products that “do what they say on the tin”, and many of the features pioneered by Vernon Hill in the US. These included:
- A flat 10% rate of interest on all loans regardless of size or the type of customer.
- A flat £500 arrangement fee for mortgages.
- A flat 13% interest rate for all credit card customers.
- Credit and debit cards provided within 15 minutes of successful application.
- Retail-style opening hours – 8 till 8 on weekdays, 8-6 on Saturdays and 11-5 on Sundays.
- A London based call centre.
- Dog-friendly stores including water bowls and dog biscuits plus, on selected weekends, £20 for people who bring their dog into a store and open a new account.
- Child-friendly stores including free pens and lollipops.
- Free “Magic Money” coin counting machines.
- Free email and text alerts on accounts and cards and weekly mini statements.
- Credit card that is free to use abroad (for cash withdrawal as well as purchases) for current account holders.
- “No stupid bank rules”.
Straight after the launch growth was extraordinary, with queues of people wanting to open an account. Branches in Earl's Court, Fulham and Borehamwood opened in 2010 followed by Tottenham Court Road, Kensington High St, Bromley, Croydon and Uxbridge so far this year. Over 30,000 customers have opened accounts – the majority, interestingly, during evenings and weekends – and the number of account openings is now running at over 1,000 a week and has doubled every month. By value, the business is 50% retail and 50% B2B. Growth has not been driven by advertising, which is not seen as cost-effective, but by PR and, above all word of mouth. 80% of new account openings now come from recommendation by existing customers. The plan is to have 24 branches by the end of 2012, 40 a year later and 200 by 2020, the majority in Greater London.
Like O2 (See Customer Insight March 2011), Metro Bank places strong emphasis on being a local business with strong community links. Businesses particularly like localness. As well as the convenience of a local branch whose opening times suit someone who works long hours and may need to pay in cash in the evening or at weekends, they like dealing with a local bank manager who looks after all their business and personal banking needs and whose direct number they know. Just like the old days.
Staff are encouraged to engage with the local community and each store adopts a local charity or cause. Events generate good local PR as well as supporting elements of the bank’s core strategy, as typified by the joint “adopt-a-thons” with Battersea Dogs and Cats Home. As well as finding new homes for many dogs and cats, the most recent event, held in August at the Bromley store, featured a Kennel Club clinic for dog owners, with advice about other local dog friendly businesses plus a dog trainer clinic to advise on dogs with training issues. As Metro Bank and the Kennel Club are both keen to involve children as well as dogs, the Kennel Club also gave out free membership packs to children and teenagers interested in joining its Young Kennel Club. For every account opened by someone who brought their dog along with them, the new customer received a dog-themed goodie bag including a Kennel Club Puppy Handbook, Young Kennel Club colouring sheets and a dog toy.
Metro Bank as a whole also supports a charity– currently Centrepoint that attempts to find the homeless somewhere to live. In September, the bank launched an educational initiative where it will be going into local schools around its branches with six lessons about banking for 8 to 9 year olds. For the final lesson they will bring the kids into their stores, get them to sit behind the counter and have a look around the vaults.
As Harvard have been telling us for many years, the most successful companies tend to be built on high levels of the 3Rs – retention, related sales and referrals. Since most people switch banks very rarely, it’s too early to talk about retention, but Metro Bank is clearly succeeding already on referrals. The interesting one is ‘related sales’. Cross selling to maximise customers’ product holding has been an important part of banks’ strategy for many years. Metro Bank offers a range of products but does not cross sell. In fact, staff don’t engage in any kind of selling. The way it’s done is by delivering a superior customer experience rather than by incentivising staff to sell. Sales and profits are not seen as goals per se, but as by-products of having satisfied customers who, of course, will stay, buy more of your products and recommend you to others.
Whilst other banks tend to remunerate front line staff on hitting sales targets, all staff at Metro Bank are rewarded on customer satisfaction, which is measured continuously (through research, customer panels and mystery shopping) and is monitored not just at branch level but right down to individual members of staff. Customer service is a prominent part of employees’ quarterly appraisals and a customer satisfaction-related bonus is paid annually.
Metro Bank also has a very young culture. Over 50 per cent of staff are under the age of 25. They have a policy of trying to recruit as many employees as possible from the 18-25 year old age band where unemployment levels are very high. When new stores are opened in Chiswick, Ealing and Hounslow, 15 out of the 25 people employed in each one are likely to be between the ages of 18 and 25. As well as providing an opportunity for young people to get a job, Metro Bank is prepared to promote them very fast if they are good.
Recruitment as well as promotion from within is encouraged. Where possible, Metro Bank recruits from recommendations made by staff, giving the employee £500 if the person they recommend is appointed. This is reminiscent of best practice companies such as South-West Airlines featured in Harvard’s Service-Profit Chain, on the basis that if you want people like your current people (employees or customers), target the people they associate with. Whether friends or family, people tend to be closest to like-minded people. Whether its customers or employees, Metro Bank wants “fans” – people who engage with the business and enthuse about it. Another similarity with O2.
Something else that’s straight out of the Service-Profit Chain is the recruitment mantra – “recruit for attitude, train for skills”. Metro Bank is very selective, with 3,500 people interviewed for its first 60 customer-facing posts. The majority of the one day assessment process is spent in role play designed to identify the candidates with the right people-focused personalities to fit the Metro Bank business model.
Another key element of the business model is relentless execution – doing a thousand things a little bit better. This is encapsulated in their “amazing customer service” philosophy which is enshrined in the company’s vision:
“Amazing the Customer means providing unparalleled Customer service, making sure every transaction goes quickly and smoothly. It means fulfilling Customer needs, even anticipating them. More than that, it means turning Customers into FANS. We want them to tell their family members, friends and business associates about the products and superior services we provide.”
- Attend to every detail
- Make every wrong right
- Ask if you’re not sure - Bump it Up
- Zest is contagious – Share it
- Exceed expectations
AMAZE features everywhere in Metro Bank job advertisements, internal training and quarterly appraisals.
Will Metro Bank succeed? With every element of its DNA aligning with the philosophy of this magazine, we obviously hope so. Apart from the great customer (and employee) experience they’re delivering, they’ve had a certain amount of luck with their timing. When plans for the new bank were hatched at the end of 2007, they couldn’t have predicted just how unpopular most big name UK banks were about to become. They didn’t know how much the Government was going to encourage new banks to open up on Britain’s high streets. They didn’t know that the publicity generated by customer complaints about banks and the mis-selling of PPI was going to become quite so prominent. But banking is a competitive industry with immensely powerful incumbents, who will not take any new competitive threat lying down, even if it is from a relative minnow like Metro Bank. Barclays has already launched its new friendly, open-plan bank layout, which it is currently rolling out across 1,600 branches. But whilst they can copy Metro Bank’s store layout, it will be much harder to replicate its culture and its genuine focus on delivering great customer experiences. As Anthony Thomson says: "Fortune favours the brave. To be honest, we didn't know quite what to expect at first, but there is obviously a real demand from people for a different kind of bank." Based on the company’s organic growth in its first year, he’s clearly right so far.