The retail banking industry is waking up to what the rest of us have known since the dot-com bubble burst in the dawn of the new millennium a little over four years ago. The internet is a route to market and its future in revolutionising the way we do business is about connectivity, but it doesn’t replace the existing retail locus.
Retail banks have discovered that they can’t take their trade entirely online. Sure, much of the transactional side of account management has successfully been digitised, but the sales function – particularly for higher-cost items such as mortgages and loans services – needs to be located in a branch network. Consequently, the banks, after a couple of decades of redundancies and branch closures (with one or two counter-cyclical exceptions), are reinvesting in a high street presence and the personnel to staff them. Barclays last week announced that it is to cut 800 staff from its headquarters and recruit 1,000 more branch staff.
That trend is repeated elsewhere. Royal Bank of Scotland, which owns NatWest, has just taken on a similar number in an effort to reduce branch queues. Lloyds TSB is planning to open branches at railway stations – a sort of banking version of Tie Rack – and is reappointing about 400 “meet and greet” staff. Abbey is recruiting a similar number and revamping its premises. This is a long way from reversing the closure programme of the past 20 years, which saw some 3,500 branches disappear. It also demonstrates that high street retail finance is far from the anachronism that it has been claimed to be.
My guess is that concerns over security on the internet and remote, inarticulate telesales staff have alienated customers. Complaints about banks rose by nearly 60 per cent in 2003, while complaints about customer-service standards more than trebled, according to the Banking Code Standards Board. Like so many other transactions, customers like to surf the Net for research purposes and for simple transactions, but for larger and more complex purchases, and for advice, they want to be able to eyeball a company representative.
This retrogression to the days when a liveried flunky opened the door for you, took your umbrella and called you “sir” – or something more 21st century, such as taking your laptop and calling you “mate” – has been accompanied by an influx of senior executives from industries that historically have been more used to engaging with their customers. Halifax Bank of Scotland (HBoS) has acquired a head of retail banking, Andy Hornby, from Asda, while Abbey has a customer propositions director, Angus Porter, who used to run the consumer division of BT Retail.
In marketing terms, these people have previous offences to be taken into consideration. At Mars, Porter renamed the Opal Fruits brand Starburst. Hornby is responsible for the myopic, Brummie-singing bank manager Howard, who rides flying swans. In mitigation, it should be entered that HBoS won 1.2 million new accounts last year and about a million new credit-card customers. It also saw its pre-tax profits rise 19 per cent to £1.69bn.
The real question, though, is where these consumer marketing people are going to take retail banking. On what model is this industry to be developed if it is to emulate other consumer businesses? My view is that retail banking could learn a great deal from the recent experience of the fast-food industry, or “convenience restauranting”, as it would rather be known.
Banks have started to grasp that, like fast-foodies, customers want to be served quickly – that’s why they’re staffing up again. But they also want a degree of comfort – the Starbucks factor has something to teach the banks here. I predict sofas and frappuccinos in banking halls by next summer.
More fundamentally, the food industries are facing, in the wake of a parliamentary select committee report on obesity, demands for clearer nutritional information on their products. The buzz around food companies is “informed choice”. There is an absurd proposition for foods to be labelled with traffic-light logos, with red for the fatties, green for the outright healthy and amber for anything that’s good for you of which the food police disapprove.
A similar system would be better suited to retail banking, so that we can see which financial products are good for us – and which will simply make the bankers fat. This is not a facetious suggestion. The financial services industries have been hopeless, possibly for cynical reasons, about informing investors adequately about their products, relying on notoriously impenetrable small print. A great service that consumer marketers can bring to retail banking is to tell us what is in what we consume from our banks. George Pitcher is a partner at communications management consultancy Luther Pendragon