Why banks should focus on service

With the likes of TSB and Tesco poised to enter the retail banking sector, Anthony Thomson, founder and former chairman of Metro Bank, outlines why marketers must put the needs of their customers before the needs of the bank.

When I first had the idea to launch a new bank in the UK, back in 2007, it came from a consumer insight. Every piece of market research I had seen said that traditional high street bank customers were dissatisfied with the service that they received from their bank.

There were (and are) one or two notable exceptions such as First Direct, that have excellent customer service ratings, but the vast majority acted as if the only thing that mattered to customers was price (or ‘rate’ in bank parlance).

I believed that there was an opportunity to create a "new" bank that focused on customer service and convenience.

At the time many people said the idea was crazy. They argued that the barriers to entry were very high and that customers expressed little interest in changing banks. In fact, if I had a pound for every time someone told me "you were more likely to get divorced than change banks" I wouldn't have needed to launch a bank.

However, whilst research did indeed indicate that less than 5% of customers switched banks, there were a number of pieces of research that suggested, between 25 and 40% would consider switching if there were  a real alternative…

Metro Bank was about providing customers with that "real alternative". It opened its doors in July 2010 and over the past three years Almost 200,000 accounts have been opened in 18 Metro Bank stores (we call them stores as we think of ourselves as retailers.)

So why haven’t there been any new banks since then?

It is true that there were a number of barriers to entry at the time. Getting authorisation from (the then-regulator) the FSA was a long and difficult process. New banks were required to hold large amounts of capital and access to the payments system, which was owned by the big banks, was very difficult.

However, since then, most of those barriers have been reduced or even removed. The authorisation process has been massively simplified and shortened, the amount of capital new banks have to hold has been substantially reduced and the Treasury has announced that it will ensure new entrants have fair access to the payments systems.

Read the rest of this story at Marketing Magazine's website.