Shifting sands for finance in the UK
Commentary by Richard Nicholls
Business Development Manager at Teleperformance
The Financial Service industry in the UK is constantly changing and the recent weeks have been no different with HSBC retrenching services and reducing its staff numbers, government plans to sell RBS back to private investors and the regulators launching new rules to govern banker’s bonuses. But of particular note is the announcement that French car manufacturer Renault has just started offering banking services in the UK this month!
The manufacturer announcement is not quite as unusual as it sounds, many car manufacturers have extensive finance arms, but they are usually restricted to operating with some link to a car purchase. Some commentators have even suggested that some manufacturers only build the vehicle so that they can sell a loan to the customer!
But there is a bigger trend emerging that I believe is important. Big full-service banks are finding it harder than ever to earn a good profit in the UK, particularly with the regulatory expectations within retail banking and cultural expectations of British people that banking should be free – I can’t think of another country where this tradition is applied.
Credit Unions have filled the ‘trust-void’ and have taken business away from traditional banks with 109% growth in membership the last 10 years and lending up to £688 million in 2014 which is a rise of 119%
Small specialist operators are picking off very specific parts of the market and just offering one or two services that they can do very well.
The growth in app culture has also facilitated this. You don’t need to build a branch network when you can launch a service and make the front door an app.
Renault is a good example of this focused approach. They are only offering a savings account product – nothing else. All information about the product and applications are handled online and they believe a simple option, available to customers 7 days a week will be sufficient to build a banking business.
Look at the app store for lenders and investment products and it is full of new and unfamiliar brands, however by focusing on single products it is often possible for these new market entrants to beat the banks.
Meanwhile on the high street, Metro Bank has been a more or less runaway success in the UK’s South East, with no plans for an online or app offering. With its ‘retail’ opening hours, touch and feel, it has almost unnoticed stepped into the ‘trust’ void left by large, traditional banks which credit unions are also monopolising on. The demand from customers for a trusted bank is evident if you take a look at Metro Bank’s growthOver 500,000 customer accounts opened; year on year growth of 56%
– Deposits increase to £3,375 million; year on year growth of 109%
– Total loans grow to £1,830 million; a year on year increase of 91%
– Almost half of total lending is to business customers
What can the banking sector do? First, they need to remember that in finance a brand is worth a huge amount. Customers will often pay a little more for a service from a company they know and trust, especially as the reputation of financial institutions has never been questioned so vigorously before.
Secondly though, they need to appreciate that customer satisfaction is the difference between the expectation you have of a brand and the actual experience. The better your reputation and stronger your brand the harder you have to work to maintain that satisfaction and delight.
The move to mobile banking through apps has gathered significant pace with more than 6 million transactions a day using smart phones and other mobile devices. That number is rising with customers opting to contact the branch only for big decisions and transactions.
Undoubtedly Metro Bank and the new breed of niche ‘retail banking’ service and product providers will need to plan for the future when customer expectations, often driven by the best in retail, will shift again to embrace a new channel, device or proposition, but when all is said and done, assisted voice and non-voice customer service will continue to play a crucial role in helping customers determine their preferred financial services provider.
