At a time when the UK banking sector is in retreat, launching a new bank brand and branch network could be seen as audacious at best, foolhardy at worst. But Anthony Thomson, chief executive of trade marketing body Financial Services Forum, and Vernon Hill, architect of US-based Commerce Bank, seem intent on doing just that with Metro Bank.
And the industry seems confident that the launch, whether it succeeds or fails, will at least inject dynamism into the sometimes staid financial services sector.
Fundraising documents leaked last week show that Thomson and Hill – as vice-chairman and chairman, together with an unnamed but “heavyweight” management team – intend to launch a London-based branch network based loosely on Hill’s Commerce Bank. Metro Bank, pitched by Wall Street brokerage Keefe, Bruyete & Woods, is looking for an investment of 100m.
Hill founded Commerce Bank as Commerce Bancorp 34 years ago, basing its business model on that of the Burger King restaurants he once owned.
Consumer convenienceCommerce took Chase Manhattan Bank and Citibank by surprise and grew rapidly in New York when it entered that market in 2001, offering consumer convenience with features including seven-day banking; quick service and focus on consumers and small businesses, mostly in suburban “high street” shopping districts and drive-through branches.
Insiders suggest that convenient and extended opening times will help set Metro Bank apart in a complex and highly competitive UK market. Others counter that rivals can easily emulate the formula, potentially squeezing out Metro Bank before it is able to grow. One source points to Commerce Bank, which got less initial traction when it launched in the Washington region of the US, when competition responded with extended hours and improved service in anticipation of Commerce tactics.
HSBC UK marketing director James Boulton says/ “We have seen quite a few new entrants in the past decade, and all have had their challenges, particularly in differentiating themselves.”
Different strokesHe points to the likes of HSBC,which has the scale to deliver a portfolio of brands, such as First Directand HSBC Premier, as well as white-labelled services for M&S Money and the John Lewis Partnership, to meet “different customers’ needs and service expectations”.
“We’re not afraid of competition. It keeps us sharp and we welcome it. We look forward to seeing how Metro Bank fares in one of the world’s most complex and dynamic financial services markets,” adds Boulton.
Patrick Muir, UK marketing director of Citibank and launch marketer of direct bank brand Egg (now owned by Citi), says: “Competition is a natural driver of innovation, which makes for a more interesting, powerful industry,” he says.
And, despite the costs involved in setting up a branch network, as opposed to the direct model taken by Egg, Abbey-owned Cahoot and First Direct, he believes customers like the convenience of such “stores”.
Yet he questions whether Metro Bank has the financial clout to realise its ambitions to open 220 branches in the Greater London area within a decade. “Running branches is an expensive business, particularly until you reach a critical mass where you can drive retail value,” says Muir.
Metro Bank disputes the perception that consumers rarely and reluctantly change current accounts. A report published last month by the Office of Fair Trading reveals that 6% of current accounts are switched each year and a further 24% of people would move if there was a “viable alternative”.
Yet, as Muir adds: “You have gotto be very careful with grand statements that you back them up with grand actions.”