How do you launch a new high-street bank into a market that hasn’t seen an entrant for more than 100 years, during the worst financial crisis since 1929, and in the face of mass loathing of bankers?
According to Anthony Thomson, founder and chairman of Metro Bank, the answer is simple. You focus on the customers.
“High-street banks would have you believe that all that matters is the rate. That’s complete nonsense because in every other aspect of consumers’ lives, what drives them is value,” he says. “Customer experience is the only thing that matters to us.”
The first Metro Bank opened in London’s Holborn in July 2010. There are now 12 branches – or stores, as Thomson calls them in the language of retail, rather than banking – the most recent opening in Chiswick this month. The business opened 7,655 accounts in 2010, rising to 38,291 in 2011.
The intention is to open one a month, with a target of 40 stores by the time of the company’s planned initial public offering in the first half of 2014. After some initial scepticism, the focus on customers seems to be working. Thomson claims that surveys show 93% of customers are either satisfied or very satisfied, and the customer advocacy rate stands at 84%. The bank is attracting between 1,500 and 2,000 new customers a week, of which eight out of 10 are referrals.
Metro Bank is Thomson’s third business. In the 1980s and 1990s, he built City Financial Marketing, which became the biggest financial services marketing communications group in Europe before he sold it to Publicis in 1998.
“I’m not a banker by background; I’m an entrepreneur by choice and a marketer by preference,” he explains. “At City Financial Marketing, one of the things I noted was that a lot of companies in financial services were pretty Neanderthal in their marketing.
He claims: “They saw it as a zero-sum game that they could only win at the expense of the customer. But there was a small group of companies that recognised marketing was win-win; that good marketing was good for the consumer, and that profit was a by-product.”
Having sold his agency group, Thomson wanted to pursue this idea, so in 2000 he created the Financial Services Forum, a membership forum for senior executives in financial services companies aiming to help its members improve the effectiveness of their marketing. At about the same time, he became aware of a successful bank operating on the east coast of the US.
“Commerce Bank was very unusual. It was loved by its customers – it had one of the highest customer satisfaction rates of any business in America; not just banks, but any business. It was also producing 25% compound annual shareholder returns. So it was loved by both its customers and its shareholders, at a time when you couldn’t find a bank in the UK that was loved by either group,” he says.
Despite being impressed by the Commerce Bank model, Thomson felt it was built for the suburban US market. It wasn’t until late 2001, when the bank started operating successfully in the greater New York area, that he started to believe its approach could work in the UK.
Thomson did not work alone. He joined forces with Metro Bank co-founder Vernon Hill, who devised the Commerce Bank model, to bring it to Britain. He recalls: “We spent September to December 2007 looking at the British market, and in December 2007, we decided to launch a bank.”
There followed two-and-a-half years of submissions to the Financial Services Authority, work on the business plan, raising capital, building the infrastructure and recruiting the management team before the bank was finally authorised in March 2010.
“Some say we were lucky with our timing,” Thomson says. “We arrived at a time when people were even more dissatisfied, if that’s possible, with the existing high-street banks [than ever before].”
In creating a new high-street bank, Thomson stresses the importance of convenience and service, adding that the retail model is part of every aspect of the business.
“We think of ourselves as a retailer, and we say ‘let’s be open when people want to bank’. So we’re open from eight in the morning to eight at night Monday to Friday, eight till six on Saturday and 11 till 5 on Sunday. That’s the convenience element,” he explains.
“Service is about how you ensure a great customer experience. So we recruit people who want to give great banking experience, and then we train them in banking skills.”
The bank interviewed 3,500 people for its first 60 customer-facing roles, and Thomson says that among other things, they were looking for people who smiled. “We’ve all been into businesses where you as a customer are clearly an intrusion into the day of the person behind the counter,” he says. “We didn’t want that.”
In addition, Metro Bank rewards its staff based not on sales, but on customer satisfaction scores. He argues: “If you give a teller a sales target and you give them up to a third of their remuneration in sales bonuses, then you shouldn’t be surprised if they sell things, and that’s why the UK banks get 5,000 complaints every week.”
According to Thomson, Metro Bank measures customer satisfaction religiously. It mystery shops all its branches every other day, runs customer panels for feedback, collects customer feedback forms and examines complaints carefully to see what can be learnt from them.
The final aspect of being able to deliver great service is empowering staff to do so, which Thomson admits is difficult. He cites an example from the earliest days of the bank, where long lines built up with people keen to open accounts. One morning, one of the customer service representatives told Thomson that the new customer he was helping had run up £8 in parking fees.
The customer service representatives wanted to give the customer some money towards the fees and suggested £4 as a goodwill offer, because he didn’t want to offer too much of the bank’s money without approval.
“I said ‘that’s fine; we’ll just half piss her off’,” says Thomson. “The difference between £4 and £8 in the lifetime value of a customer to us is just a rounding error, but to one of our staff, it might be a quarter of what he spends going out on a Friday night. So it’s a matter of having people understand what being empowered means.”
The bank’s watchword is AMAZE, an acronym devised to help this process of empowering staff. “It stands for Attend to every detail; Make every wrong right; Ask if not sure; Zest is contagious – share it; Exceed expectations. So if you work for Metro Bank and I say you’re empowered to give great service and you don’t know what that means, you can say your job is to amaze people.You don’t have to be technically competent or possess years of experience in the bank to go through those letters.”
Linked to this idea is a philosophy that whoever receives a complaint from a customer should be the person who sorts it out. This applies whether you are on the front desk at a branch or Anthony Thomson himself. He says that everyone should be able to investigate an issue, tell the customer their solution, apologise and if necessary offer financial recompense. But, he says, often customers don’t even want financial recompense for a problem, they simply want someone to acknowledge what has gone wrong and fix it promptly for them.
Underpinning this approach is the single customer-view database provided by the bank’s IT platform. This means that the same set of customer data is seen by people in the call centre, online or in stores. Thomson explains that all customers are listed by name, rather than an anonymous account number.
“When you join us as a customer, you’re not an account number, you’re a name; and all of your relationships hang off your name. So you don’t have one number for your ISA and another for your credit card. And I don’t believe you can be customer-centric without this.
With the staff and systems in place, the final step in his plan for Metro Bank is what Thomson calls “retailers’ details” – a relentless focus on the details of execution. He says that this is the reason why its branches open 10 minutes earlier than the official listed time, so they are ready for any customers arriving in a hurry first thing in the morning.
Looking forward, Thomson sees the bank’s marketing strategy becoming more sophisticated. Metro Bank is just about to appoint its first marketing director who will have, Thomson jokes, a long list of priorities.
“In terms of the stores, they’re a great advertisement and attract people to come in. We’ve been incredibly successful with PR,” he notes. “Our social media strategy seems to be working well. As we grow our marketing will need to become more sophisticated. But we’ll never use it as a proxy for delivering great customer service.”
The history of Metro Bank
2001 Anthony Thomson hears about Commerce Bank in the US.
2007 Commerce Bank is acquired by Toronto Dominion Bank. Thomson approaches the new owners about bringing the model to the UK.
2010 Metro Bank is authorised in March and opens its first store in July, in London’s Holborn. A further three stores open by the end of the year.
2011 Another six stores open in London.
2012 Number of stores reaches 12 by May.
Anthony Thomson’s lessons on being customer-centric
…Always ask why you’re doing something
“When we were building the bank, I’d sit in on all the meetings and ask the same question, which was ‘are we building it this way because it’s more efficient for the bank, or because it will give a better customer experience?’”
…Be relentless in policing your model
“I spend a lot of time walking around stopping my brilliant colleagues turning us into a bank, because left to their own devices, they’d revert to type.”
…Don’t pay lip-service to customers
“I’ve seen a lot of companies spend a lot of money on market research just to save themselves the bother of having to go to Gateshead on a wet Tuesday evening to do a focus group. Every week, I’ll sit down with customers or put on a pair of headphones in our contact centre, and listen to the real lives of customers. You can never be too close to your customers.”
…On the secrets of success
“The secret sauce is not one thing; it’s 1,000 things all done a bit better.”