When MetroBank launched in 2010 it was the UK’s first new high-street bank in more than a century, and in the wake of the financial crisis it promised to prioritise customer service and convenience. Future Banking spoke to CEO Craig Donaldson about the company’s approach to business and the challenges still facing the industry.
Following the financial crisis of 2008 and the negative public reaction to the banking sector, a new, young player emerged on the high street with the intention of changing the face of industry. Unburdened by the baggage of the past, MetroBank put forward a new model when it began in July 2010, one that combines old-fashioned principles and new technology.
CEO Craig Donaldson is an evangelist for a new age of customer-centric banking that prioritises service quality and convenience. His aim is to make banks as modern and relevant as organisations in any other industry.
"The core challenges are all about legacy, whether it is the legacy of technology - with the lack of investment that has been put into banking - the lack of focus on customers and on understanding what customers want, or the lack of focus on building trust. To me, it is all about dealing with the legacy of the past to build the future," he says.
As a new player in the market, MetroBank is unencumbered with the legacy systems that present such a challenge for older banks, which must initiate costly rip-and-replace initiatives or add further layers of technology.
"We've built all of our systems over the past four years, so we've been able to take the best technology available," says Donaldson. "We've just had a huge upgrade three years in - a major investment in new technology - so we've all now got the HTC Windows 8 phones, and we all work on new Samsung tablets, meaning that I can log on from anywhere and do my CRM or update my customer records.
"You need to be able to write off technology in a sensible period of time so you can keep upgrading and focusing on delivering to your customers. Too many organisations are still using the 2003 version of Microsoft, which stopped being supported by Microsoft two years ago. They don't upgrade, and they don't think about the upgrade path needed to stay at the cutting edge. Customers want the focus to be on them with the technology to support them."
Online vs 'in-store'
Although he firmly embraces new technology, Donaldson does not accept that a transition to fully digital banking is inevitable.
"People will always want to deal with humans," he explains. "Direct channels will be more important, but more and more people - especially SMEs and individuals getting their first mortgage or having really life-changing discussions - still want to do business face-to-face. To me, it is about giving customers the choice. Of course, people can do things online, and we are very active on channels like Twitter, but service should be through all channels.
"You have to let customers choose how they interact with you. If you are dictating to them, then you can't say that you are customer-focused. If you truly want to be about service and convenience for the customer, then you have to let them make the decisions and not the bank. It is about creating the right environment."
This approach is evident in MetroBank's policy on what the industry usually calls 'branches'.
"First of all, we call them 'stores' because we want to give customers a retail experience," says Donaldson. "When people walk through our doors I don't care whether they are billionaires or buskers, I want them to be welcomed and looked after. They are customers, and our job is to make them feel comfortable and let them know that we are there to serve them.
"I love what John Lewis talks about. John Lewis says its job is to be channel agnostic. It wants to offer the same great service through whatever channel a customer chooses. It should be a customer choice. If you are a service-focused organisation, if the customer wants to deal with you through whichever channel, your job is to ensure the choice is there. Therefore, stores will always be important because customers want them."
Meeting customers' needs
Donaldson gives another example of MetroBank meeting the needs of its customers: "We've built our systems to do as much as we can at point-of-sale, so if you lose your card you can pop in today and we will print you off a new one. Why should you have to wait two weeks? You're the customer, it is your account and it is your money. But it also means that if you want to come in and open an account today you can get the card - the real contactless card - in your hand today. We believe that we are the first people globally to produce a chip-and-pin contactless card at point of sale. Why? Because customers told us they want it."
All MetroBank stores are corner sites with at least 3,500ft2 of space and, where possible, a 16ft ceiling height. The aim is to create a transparent, clear and welcoming environment, and it marks the bank out from its competitors.
"We don't have legacy premises, we don't have legacy people and we don't have legacy technology," stresses Donaldson. "We've got people we recruited in the last three to four years, who are all about their attitude. We recruit them for how they interact with customers."
A further facet of in-store culture that sets MetroBank apart is the unspoken ten-minute rule: stores open ten minutes before and close ten minutes after the advertised opening hours.
"It is a cultural thing, saying that we'll be there when customers want us. It blows customers away," says Donaldson.
Rebuilding trust in banks
"We are built on a very simple ethos: create fans. That's it," says the MetroBank CEO of the company's approach to establishing a relationship with its customers. "Our job is to make fans of our customers. Everything we have done is about that, which is why we open seven days a week from 8am to 8pm. We have looked at the things customers complain about and got rid of them. So the negative image that people have of banks has not impacted us."
He continues: "We are a retail and commercial bank. We don't do investment banking. We focus on raising deposits from our customers through our great service and convenience and then lending out a percentage of it.
We don't have any wholesale funding, which means we are focused on our customers and not on the markets."
Every bank has understood that its future in the industry depends on its ability to embrace a customer-centric model. New entrants to financial services are bringing their experience of other industries to bear, and enhanced analytics capability in the era of big data enables banks to develop more personalised services than ever before. But many banks still find it hard to shrug off familiar ways of doing business, despite the pressure to respond more quickly to changing customer needs.
"If your biggest funding line is from wholesale markets, then you focus on wholesale markets," says Donaldson. "If your biggest funding line is from customers, then you focus on customers. Our plan is that for every £100 we win from customers as deposits, we will lend out £80.
So many banks now have loan/deposit ratios of 40% and 60%, but we will have up to 80%. It is a good, old-fashioned model that allows us to focus on our customers.
"The biggest legacy that banks have to deal with is their cultures, which have forgotten about their customers. Put the customer first.
We all talk about it, but you have to live it. The customer has to be at the heart of what you do."