Metro Bank, the UK-based retail bank founded by
celebrated US entrepreneur Vernon Hill, will open the doors of its
first two branches in the second half of June, with plans to open
another two branches later this year and a further eight in 2011,
all located in the Greater London area.
Despite the economic gloom
enveloping the UK economy, Hill told RBI: “This is
actually the best time to enter UK market.
“Customers from the business and
consumer segments both show massive disenchantment towards the
country’s big retail banks. They are too big to manage… too big to
fail. Major banks, such as Royal Bank of Scotland [RBS] and Lloyds
have basically failed and have no funds to improve and
Metro’s goal, to change the markets
perception of what a bank should be, is based on the runaway succ
ess of Commerce Bank, the US lender founded by Hill, a former
RBI Banker of the Year Award winner.
Commerce revolutionised US retail
banking with innovations such as evening and weekend branch
opening, free coin-counting machines and a fervent focus on service
excellence all wrapped up in a phrase Hill himself invented: Power
He continues to target £50bn
($72bn) of total deposits within 10 years of Metro launching,
describing it as “not an outrageous goal” and gives as an example
the success of Commerce when it debuted in New York City.
“Within five years of opening
there, we had $40bn in deposits,” Hill said.
Metro will open with
a full range of current accounts, savings and loans for its retail
customers with innovations new to the UK market including instant
debit and credit card issuance.
Corporate business will be focused
on commercial cash management and the SME segment.
Hill argued that Metro will enjoy a
“tremendous advantage from day one”, as a result of Metro’s IT
platform, outsourced from IT partner Temenos.
“There has been massive under
investment in IT and delivery channels in the UK. In fact, UK bank
IT systems are still in the Stone Age,” Hill added.
“The typical outsourced IT model
that all new US banks use, where you pay per account per month
rather than paying the money up front, has never been used in the
“I tell bankers from the other UK
banks: ‘You must be the best bankers in the world, operating with
the IT that you have’.”
As for the prospect of heightened
regulation, Hill is unfazed.
To the proposal, advanced by some
politicians in both the US and UK that investment banking is
separated from commercial banking, Hill said: “There may be some
pluses to that approach but we may have gone too far down the road
to make that happen.”
In addition to local store
marketing and “very large, three-day branch opening parties”, Metro
will kick off an advertising campaign, primarily print-based, in
the weeks leading up to branches opening.
While the branch is at the heart of
any retail bank in which Hill has an interest, he is a fan of the
opportunities presented by the digital channel and Metro is
planning applications for Apple’s iPhone and iPad.
“I just got my new iPad and am like
a kid with a new toy. Apple, with only 5% of the computer market
changed the world… it made computing fun. I am more excited than
ever before about the Metro launch in the UK. The market is ready
for a new bank… and we will have fun.”
For Metro, the hope is
that falling customer satisfaction levels mean more customers will
switch their main banking provider; a survey earlier this year from
Ernst & Young reported that only 8% of UK bank customers was
planning to switch banks (see chart, right).
Shake-up for established
The established order among the
UK’s traditional Big Four retail banks is set for a further
shake-up, with news that Santander – which entered the UK market as
recently as 2004 – is in pole position to acquire 312 RBS and 6
NatWest branches being sold by RBS as part of its back-to-basics
plan, agreed with the European Competition Commissioner following
its receipt of state aid.
The sale of the branches is likely
to net RBS a sum approaching £2bn and will result in Santander
increasing its current 1,325-branch strong, UK-based network by
almost one-quarter to 1,643 outlets, just behind Barclays (1,700)
to become the UK’s fourth-biggest bank by branches (see chart,
Virgin Money dropped out of the
race for the RBS branches after being told informally it was
excluded from the auction on 7 May.
UBS, handling the auction on behalf
of RBS, told Virgin not to progress with its proposal.
The financial arm of entrepreneur Richard Branson’s Virgin will
now pursue organic growth, with the aim of building a 70-strong
branch network over the next three or four years.