The blue and red signage of Metro Bank is now a staple of most UK high streets, but the institution still faces stiff competition from older incumbents and more nimble app-based rivals. Greg Noone talks to Martyn Atkinson, the firm’s director for change and digital, about how the bank’s continual investment in its IT capabilities is helping it to defend its patch of the middle ground.
Vernon Hill isn’t known for taking prisoners. The founder of Metro Bank has collectively described its rivals on the high street as a “cartel”, said there had been “no entrepreneurial tradition in banking” before he arrived on the banking scene in 2010, and decried UK investment culture as “a drag on growth companies”. Hill was at his most scathing when he expounded on the state of the UK big five banks’ IT systems to the Telegraph in 2013. “The smallest bank in Mississippi has better IT than the British banks,” the billionaire pronounced. Their IT systems, meanwhile, were “one step up from a quill”.
Hill’s pugnacity has hardly diminished over the years and partly explains the stunning growth Metro Bank has enjoyed since its foundation in 2010. Although largely confined to the south-east of England, Metro has a market capitalisation of £2.75 billion and operates 48 branches in the UK, the goal being to reach 110 by 2020. The cornerstone of this growth, according to the bank’s director for change and digital, Martyn Atkinson, has been the adaptability of its IT systems to weather changing circumstances.
“We are a new bank and, therefore, we’ve been able to design our technology architecture in a way that allows us to future-proof and also, maybe, learn from some of the challenges that the bigger banks have faced by thinking about designing [systems] that are resilient from the start,” he explains. “What it allows us to do as an ebank is to make sure that we don’t sleepwalk into very similar challenges in three to five years’ time.”
Atkinson’s criticisms are not misplaced. Last year, four of the UK’s biggest high-street banks suffered glitches in their IT systems that disrupted transactions for millions of customers across the country. In January 2016, HSBC’s online banking system failed for two days running. Three months later, Barclays saw its own payments system crash, with customers complaining on the bank’s Twitter feed of being cut off from funds they needed to use for mortgage payments and moving house. In October, another IT glitch saw customers with Royal Bank of Scotland (RBS) unable to use their debit cards to make transactions in pound sterling.
While the big five seemed to be putting out fires left, right and centre, Atkinson and his colleagues were busy overhauling Metro’s own comparatively nimble IT systems. Starting in January 2016, Metro Bank redesigned its mobile banking app for its business and retail customers, implementing analytic software that provides advice on financial incomings and outgoings, as well as granting customers the ability to unblock bank cards that they’ve misplaced with a single swipe. The bank also refurbished its front-facing website and, in November, partnered with SETL and Deloitte to test a new contactless smartcard based on the blockchain payment method.
Perhaps the most important investment Metro Bank has made has been in the migration of its core IT infrastructure to an external cloud provider, a development Atkinson contends will transform the firm’s adaptability in the face of new and emerging challenges to the integrity of its digital operations. “[It has] empowered us to operate incredibly quickly and securely, and scale our processes and services based on the demand and profiles that our customers expect,” explains Atkinson.
His team has got even more planned for the next 12 months. Special attention will be paid to streamlining the authentication process for opening new current accounts. “I think consistently, within financial services, it’s a really clumsy set of processes as to how people get authenticated, particularly when there are different approaches to different channels,” says Atkinson, who is aiming not only to create a completely frictionless experience across all of Metro Bank’s digital platforms but also to accomplish the same for transactions made in person. His team aims to start by combining the photos that the bank takes of each of its customers with digital ID technology.
“Then we can make sure it’s a really personalised service,” says Atkinson. “When you walk to the counter, we will be able to know who you are, what you did last week, if you have got any complaints outstanding or if you’re part way through a mortgage application.”
Taken individually, none of these developments are particularly groundbreaking. HSBC and Lloyds announced in 2016 that they would allow their customers to open new current accounts using selfies as valid identification. Meanwhile, Santander and Barclays have already begun to integrate voice-recognition technology into their internet and telephone banking services. All of the big five have experimented with or announced a keen interest in blockchain technology.
The uniqueness of Metro Bank’s investments in IT is an important issue to consider, given the firm’s consistent marketing of itself as the erstwhile challenger to the dominance of the big five on the UK high street. From the garish red and blue interior decoration of its branches to its free coin-counting machines and the bank’s pet-friendly policies – dogs are welcomed with fresh water bowls and biscuits – Metro has always portrayed itself as the antithesis to an aloof, vaguely mistrustful version of its better-known competitors.
However, to assume that all of this is just slick marketing would be a mistake. Rather, the intention behind Metro’s investment in its IT infrastructure has been less to enhance its reputation for forward-thinking than to mark it out as a reliable alternative to the big five. Prevailing attitudes among UK consumers towards retail banking seem to bear out the logic of this approach. A wide-ranging survey conducted by Accenture in 2015 revealed that 42% of respondents said that they would look favourably upon a bank that would blend digital and offline services effectively, a finding broadly consistent with a rise that year in customer visits to their local branch and use of their telephone banking services. Meanwhile, the traditionally high percentage of consumers interacting with their banks through digital means hardly budged.
These patterns are especially complimentary to Metro Bank’s basic operating model. While most of its larger rivals consider the money brought in by ordinary depositors as just their bread and butter, Metro sees it as its main meal. It’s for this reason that, while its larger rivals have begun to shutter theirs, Metro Bank continues to open new branches, all the while consciously modelling their layout and opening hours along the lines of shops. “I think that the role of the branch will start to change as time progresses,” says Atkinson. “I personally believe that they will start to change into centres of advice.”
According to this vision of the future, the most successful banks will be able to facilitate digital transactions effortlessly, with branches standing by to provide a physical point of contact for customers when things go wrong, or if they believe that the gravity of the transaction they intend to make justifies a face-to-face discussion with a representative. To reach this higher evolutionary state, core IT infrastructure will have to remain easy to manage and update, a model that naturally favours challenger banks like Metro, which remain unencumbered by costly legacy systems.
This model, however, is contingent on the physical branch itself remaining relevant, an idea that is challenged by the increasing prominence of branchless banks like Aldermore, Atom and Monzo. While none of these institutions are particularly large – Atom currently retains just over 14,000 savings accounts – they do offer crucial flexibility to customers who may not have the inclination, let alone the time, to queue for service in their local branch. Like Metro, these challenger banks also lack the kinds of legacy systems that beset the big five. As the banking market in the UK continues to diversify, it isn’t beyond the realm of possibility that, in this case, the ants may well end up devouring the elephants.
The personal touch
Atkinson remains sanguine about the prospect. “I personally think that they have a role,” he says of branchless banks, before invoking his younger brother as an example of a new generation of customers who now take mobile banking for granted and have no problem in working through queries with a representative through instant messenger. In spite of this, Atkinson still believes that banks like Monzo and Atom will have to overcome the mistrust engendered by the lack of face-to-face interactions with their employees in order to be truly successful.
“We think that mediated experiences, where people actually want to have a conversation with a human, are equally as important as people who are more comfortable in engaging through remote services, either through the internet bank, our mobile app or our public website,” he explains. “It’s important that we offer our customers choice and, therefore, we don’t necessarily preclude any of our demographics from engaging with us.”
It’s an approach that has served Metro Bank well: by 2020, the firm aims to net around £27 billion in deposits. History also appears to be on its side. Metro Bank’s overall strategy is eerily similar to that of Commerce Bank, an institution that Vernon Hill established in 1974. By the time it was sold in 2007, the firm managed more than 500 branches across the US, and was celebrated by industry observers for its innovative – if aggressive – approach to retail banking. Back then, Commerce also portrayed itself as the up-and-comer on the market. Time will tell whether this reputation holds for its UK successor.