I did not expect to be impressed with Metro Bank, but in mid-afternoon on a wet Thursday the branch in London’s Holborn was heaving. I have never been in a bank branch like it. There was a genuine buzz. The customers and staff were almost all young. It felt more like an Apple store than a bank. It looked more like one too.
That, of course, is exactly what its American founder, Vernon Hill, is trying to achieve with what is the most significant new bank launch in this country in decades. He believes the bank branch is the heart of banking, the key to the relationship, so he is fanatical about location and how it all looks and feels. The British can be snooty about American-style branding and its gimmicks – for example, dog bowls for those who come with their pets, big M for Metro signs and cartoon characters on the walls – but it seems to be working.
Since coming here in August 2010 the bank has opened 230,000 accounts and new customers are coming in not only faster than he expected, he says, but faster than in any bank launch ever. He now has 20 branches and plans to open a new one roughly every month to bring the total to about 200, all in Greater London.
It is all costing a fortune, of course, but he did this before in the US, building up what became the 17th largest bank there before he sold out, so money is no object. His mainly American backers have already put in two tranches of £250m and there is more there – or the possibility of stock market listing – if he needs it.
The UK has always been seen as a tough market to crack because the big banks are so dominant and people rarely if ever move accounts. Mr Hill says they will move if you offer something genuinely different. In his case that means a local bank rooted in its neighbourhood – and rooted, too, in what the Americans do so well, namely service and convenience. Thus you can come in off the street and walk out 20 minutes later, not only with a fully functioning account but with the credit and debit cards and even a cheque book that go with it. It is technology which makes it possible. Everything is on screen.
All his customers have a personal contact – what he calls the old fashioned manager – at their branch, and indeed this is the foundation of his lending policy.
“The closer you are to the customer, the less the credit risk in lending to them”, he says. British banks have, of course, long since got rid of their managers; they say they’ve lost the skills and so can’t bring them back.
“That’s just an excuse,” says Mr Hill. “It is harder to teach people to smile than it is to teach them banking skills.”
A bear of little brain? Perhaps that’s unfair
The fun this week was an evening forum where we debated whether skill or luck was the main driver of business success. It was one of a regular series of networking events hosted by The Foundation, a growth and innovation consultancy where I serve as an adviser.
Putting to one side a comment from the former British Institute of Management chief that most of what you needed to know about management can be culled from the pages of Winnie the Pooh, it does seem to me that there is a lot to be learned about business from playing Monopoly. You need to manage cash flow, to invest only to the point of maximum return on capital, not to overpay in negotiations, and to have an awareness of external risk. But the key thing is the combination of skill and luck and the fact that a really bad player can win if he or she consistently gets the roll of the dice. But it does not work the other way: no amount of skill will compensate for unremitting bad luck.
But perhaps there is a better analogy. Business is like poker in that you have to make the best of the hand you are dealt. The cards you get are luck. The skill comes partly from knowing when to bet and when to fold, but it is also vital to understand the strengths and weaknesses and likely behaviour of the opposition. A skilled player will not always win; but they should win more often than they lose.
It’s five years too late for this inquiry into RBS
It’s been a bit hard to avoid banks this week, what with Metro, the Lloyds share sale – which, as I said here back in July, would be timed for just before the Tory party conference – and the Barclays’ rights issue. But the positive news from elsewhere has, I think rather unfairly, pushed RBS on to the sidelines. Conventional wisdom says that it can’t be privatised for years; I suspect that if George Osborne had resisted the temptation to interfere, and not fired Stephen Hester, the share price would be a lot higher today than it is.
From the outside it is hard to appreciate the progress that has been made but at the time of the rescue the bank had some £400bn of what it euphemistically describes as non-core business. Today that total is under £40bn – a mere tenth of what it was, and a number which makes all the more nonsensical George Osborne’s recent decision to interfere still more by launching an inquiry into whether the troubled assets should be hived off into a “bad bank”.
It might have made sense five years ago, but not now that the bulk of that work has been done.