In a recent post AAT member Dawn Clarkson argued that putting customers first was key to reviving an ailing banking sector. Innovative banks are already using modern techniques to embrace traditional values, argues Matt Packer
If there’s an obvious disjunction between banks and their clients that has developed over the past three or four years, it is this: that banks have become steadily more remote, while financial transactions have withdrawn to the realm of personal immediacy.
Powered by smartphones, iPads and even the trusty laptop, the public have embraced ultra-convenient modern creations as one-click shopping, and have been able to log product reviews and seller assessments on the web pages of sites such as Amazon and eBay. Those retail and auctioning behemoths have therefore been increasingly personalised by their customers.
By contrast – as Dawn Clarkson FMAAT argued in her blog here on AAT Comment – in the areas of personal finance and business lending, banks have come to distinguish themselves by a lack of immediacy; a lack of convenience; a lack of any kind of user-generated buzz that may help to lift them above the realm of the horribly impersonal.
One year ago, I wrote a column for Accounting Technician online that assessed the likelihood of a return to our town centres of a new generation of Captain Mainwarings, archetypal local bank manager styled on the treasured Dad’s Army character.
I concluded that – despite pressure from property dealers and business groups for a more measured, reasoned and local voice to advise and, above all, listen to clients – resistance in the higher echelons of banking prevailed. Captain Mainwaring just doesn’t share enough of Big Banking’s world view to make the decisions HQ thinks are right, suggested Lloyds chairman Sir Win Bischoff, adding somewhat dismissively: ‘Some people should not be getting loans.’
But is there a middle way? A model that combines the technological realities and scope of modern banking with the personalisation that appears in other areas of large-scale business on the internet?
Forbes magazine argued that the man to bring this model about is Richard Branson. In a recent article that covered his takeover of Northern Rock to create Virgin Money, the journal speculated that the tycoon would tap into social media and customer advocacy to give his financial group a personal touch – and that this could extend into a clever deployment of smartphone and tablet tech to make itself accessible.
Forbes cited Virgin Money Giving as an ethical example of how Branson hasn’t levied fees from people seeking to raise funds online – although omitted the fact that he announced £60 per-year current account charges for his bank when he launched it.
That notion was only binned as a result of an effective Daily Mail campaign that cried foul over his ambition to turn a formerly taxpayer-owned organisation into his own, fee-extracting fiefdom. Until Virgin Money’s first Big Ideas make it into the public domain, then, the jury is out on Branson.
Perhaps a better-placed to seize the zeitgeist is Metro Bank. In May, the new entrant to the high-street market announced that it had acquired £125 million of capital for hiring staff and opening new branches. ‘Big deal,’ you might say. But where Metro scores on the novelty front is by basing its entire business model on having superior customer service.
The economics are not wildly dissimilar from those of other banks, but the attitude is light-years ahead. As explained by Metro cofounder Vernon Hill, the bank’s mission statement is: ‘Attract customers, make them stay with you – and they bring their friends.’ According to Hill, if Metro captures just 2% to 3% of the UK retail banking market purely by offering superior service, it will be a success – and pave the way for flotation in 2014.
In terms of models that are breaking new ground, though, the most high-profile examples are Zopa and Funding Circle: effectively, social networks – effectively financial dating agencies – designed to match borrowers up with individuals who have capital they would like to lend.
Zopa chief executive Giles Andrews told the Observer in June that his organisation takes a completely different measure of a company’s strength when weighing up its commercial potential, factoring in a range of revolutionary metrics such as the extent of its Twitter presence.
It’s prudent to conclude that Virgin Money and financial social networks should be watched carefully for signs of slippage or maturity before they become viable propositions – but Metro could be on to something.
All it is doing is seeking out the future with the neglected beacon of good, old-fashioned common sense.
Matt Packer is Online Editor of Think Publishing.