Formerly part of Lloyds Banking Group, TSB Bank was thrown from the Big Four into challenger bank status following a European Commission ruling in 2013. Two years later, the lender accepted a takeover offer from Spain-based Sabadell. What has changed in the bank in the interim? Patrick Brusnahan writes
Headquartered in Edinburgh, TSB launched on 9 September 2013, with more than 4.6 million customers and over £20bn ($30.1bn) of loans and customer deposits. It was formed from all branches of Cheltenham & Gloucester and Lloyds TSB Scotland.
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In its last results statement, TSB stated that its total assets were valued at £28bn on 30 June 2015, a 3% increase from the end of 2014.
Earlier this year, Sabadell completed a £1.7bn takeover of the bank. What has made it so appealing to investors?
Addressing the challenges
Network Research, an insights company, has been working with TSB since its years with Lloyds Banking Group on customer experience tracking services.
Part of this was a unique web-based solution with allowed every part of the TSB business, particularly the research, to react to customer trends with speed and veracity.
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By GlobalDataThe insights company claims that this has provided direct support in creating new products for TSB which have not only drawn plaudits, but helped TSB increase its market share and considerably improve customer satisfaction.
Santosh Makhani, associate director at Network Research, spoke to RBI about this process. He says: "[Lloyds and TSB] had been clients of ours for 17 years now. We were on a number of significant research programmes for them. When they were pushed apart by the taxman, it was the case that TSB had a very historical brand, without a huge amount of brand equity, and were forced to come into a competitive and fast moving marketplace and get moving very quickly.
"We had a great relationship with Lloyds TSB, but only a few from Lloyds went across to TSB, but the guys that went were more suited to the challenge of being a challenger brand. They pulled together a good team to address the challenge from a research and insight point of view. Clearly, the business at the time had a huge appetite for market research as they inherited a customer base that they did not know a huge amount about."
Janet Hurford, senior manager of customer research and market insights at TSB, adds: "TSB was created to bring more competition to British banking – to be a real challenger to the big banks and to deliver the kind of banking the people of Britain want.
"To achieve this we need to really understand our customers so it’s essential that we get good quality customer insight to those responsible for delivering our differentiated service proposition, as well as our key decision makers and the best way to achieve this is through an online portal."
Success through research
Network Research’s role consisted of research; a lot of research. The core is an ‘enormous’ customer experience tracking study where it interviews 100,000 customers every year after they have contacted TSB. This can range from anything from entering a branch or using internet banking.
After this research portion, insight is developed, put on an online portal, and sent to the workers on the ground level, such as branch managers. This was crucial as TSB customers could use Lloyds Bank branches for a limited time post-split. Therefore, making the TSB branch experience better than the one at Lloyds was seen as a distinct differentiator.
Makhani explains: "The challenge was that consumers didn’t have a great deal of expectations because they didn’t know the lay of the land after the split. We used the insight to tailor the existing experience. We have a number of people to go out and deliver training programmes to people on the ground to optimise the experience. As part of our work, we set remuneration for local branch workers based on customer experience; hardcore things you would expect from a service industry.
"Having that closed-loop feedback really helps refine the research approach and TSB’s approach to training front-office staff and, ultimately, the customer experience is the winner in all this."
Hurford elaborates: "We have a TSB Balance Scorecard that tracks the business’ performance. The Business Executive Committee (BEC) has this as a key agenda item every month to discuss.
"The portal provided us with instant access to insight, allowing us to monitor progress and give our frontline partners direct access to exactly what our customers to have a say. This means our frontline partners have the insight they need to improve customer service where it happens."
Competition present in the market
While TSB were innovating to disrupt the market, it was not the only bank to do so. Offerings such as the Santander 123 account and Halifax’s £100 switching incentive were also changing the market.
When TSB launched its Classic Plus account, there was ‘a short period of growth’ but ‘there were some concerns with the onboarding process’. The result was that TSB and Network Research began mapping the market.
Makhani says: "Santander and Halifax seem to be the most disruptive to TSB’s customer base for different reasons. TSB were losing customers at the same time as acquiring them. We helped them map the market and understand the big threats in terms of acquisition. Afterwards, they were acquiring more customers than they were losing and growth was coming in at a far greater rate than their market share would suggest."
With regard to the recent takeover by Sabadell and whether Network Research will stay on helping TSB, Makhani concludes: "I hope so. We’re in an industry that is primarily people driven from the point of view of sales and business development. We pride ourselves on being good and easy to work with. We integrate ourselves well within the business and take up a lot of the operational slack.
"We’re also able to challenge them and not be a yes man or patsy, which they value. I very much hope they’d be keen to keep working with us."
