Metro Bank is bringing some much-needed competition into the moribund UK retail banking sector and its CEO believes a traditional banking model with a focus on customer service will see it succeed in its long-term aim to win one million customers and expand into buy-to-let and shared equity markets Interview by Rachael Adams
Metro Bank CEO Craig Donaldson has big plans for the business. But he does not just want to win new customers’ business, he wants to win their affection as well.
“More than one million customers and 5,000 staff in over 200 stores, that is what I would love to achieve. And I think we can,” says Donaldson.
For “a boy from a pit village” who only chose a career in banking because it offered the best graduate development, Donaldson has risen up the ranks to help create the UK’s first high-street bank in more than 100 years is pretty good going.
He says: “I did not choose a career in finance, I just wanted opportunities to grow. Part of Barclays’ graduate scheme involved moving around a lot, so I ended up doing many different jobs. I worked in retail branches, call centres, small business, commercial, product management - I did it all.”
He followed this with senior management roles at HBOS and RBS and was then faced with an offer he could not refuse, setting up Metro Bank for founder Vernon Hill.
Metro Bank is based on America’s Commerce Bank, founded by Vernon Hill in 1973. By 2010, it had 800 stores and is credited with founding a new style of service-led retail banking, something that had a significant impact on Donaldson.
Getting FSA approval took 18 months but Donaldson is effusive about the process. “The FSA was great. Its intrusive regime is absolutely right. It just wanted to make sure we had sufficient liquidity and capital, which we did because we had more than 100 investors overall.”
Donaldson believes Metro Bank’s success will depend on its adherence to the Commerce Bank model.
He says: “We have to be fanatical about it. You do not create fans unless you wow people and you do not wow people unless you are fanatical.”
Despite scepticism regarding Metro Bank’s mania for dogs and its use of the word stores rather than branches, it got off to a strong start and has already doubled the number of stores it plans to open in its first year from four to eight.
“We have got well over 10,000 customers and more than 30 per cent recommend us to their friends.”
Donaldson says one of the reasons for the bank’s popularity is its adoption of the US attitude that the customer is king.
“When you walk into a store and everyone is smiling, it makes a huge difference. Being accessible is also important, not only in terms of opening hours but also location.”
Donaldson has very strict criteria for potential store locations. They must be near transport hubs, they must be corner sites with 3,000 to 5,000 sq ft and they must have ceiling-to-floor windows.
“The glass allows us to create an engaged environment and a transparent one, which is what banks should offer.”
Donaldson says another selling point is the bank’s simplicity and its willingness to engage with customers.
“People are disillusioned with their current providers and we are a simple alternative. We do not have 15 different current accounts, we have one. Other banks do not want people to transact with them, whereas we want to support customers and they can see that.”
He says the disillusion customers feel is not because there is something inherently wrong with retail banking in the UK but notes the lack of competition.
He says: “There is segmentation in every other market and retail banking needs to follow. We call it the revolution and I think it has already started.”
Donaldson says the work done by the Independent Banking Commission will help move the revolution along. “The more focus we can get on wowing the customer, the better.”
That is not to say Donaldson thinks the big five banks are not trying to do this. “All the big organisations do the best they can but when you are working with legacy systems in a culture that revolves around hitting figures, it can be difficult,” he says.
Part of Donaldson’s role is finding talented figures within the big banks. “I identify great people working in broken models and help bring them in to an environment with a great focus,” he says. “We are not finding it at all difficult to hire people. Next year I want to create a rule where for every person recruited, another gets promoted. I also want to recruit another 100 employees.”
Metro Bank has described its business model as traditional banking based on customer service and deposit-based lending but Donaldson is not against a high-tech approach. Other plans for the next year include Metro Bank going mobile with iPhone and Android apps.
“It is the customer’s choice as to what medium they use to manage their finances and we want to offer as many channels as possible.”
He also wants to see Metro Bank’s friend recommendations rise to 50 per cent and to expand its mortgage proposition by entering the buy-to-let and shared equity markets.
“It is about servicing people who do not fit into the mainstream’s round peg, round hole. We will be looking at increasing our loan-to-value rate, currently 80 per cent, but that is more of a long-term aim.”
All are admirable aspirations but what of the competition entering the market in the form of Tesco and Virgin?
“I am not worried,” says Donaldson. “Our culture is what differentiates us, not the fact that we are new to the market.”
He does, however, predict a different outlook for retail banking as a result of new entrants.
“You will definitely see more people switching as they appreciate there are high-street alternatives offering a superior service. My plan is that we will see a lot more happy consumers.”
Born: Sunderland, 1971
Lives: Islington, London, with wife and two children
Education: Newcastle Royal Grammar School, then a degree in technology and management at the University of Bradford
Career: 2009-present: Metro Bank CEO, 2007-2009: product director for Natwest; 2005-2009: managing director of mortgages and
consumer director at RBS; 2003-2005: product manager for Halifax and Bank of Scotland; 2002-2003: head of sales and operations for North-west, Wales and Northern Ireland at HBOS;
1990-2002: product and marketing manager, com-ercial director of mortgages
and insurance at Barclays
Likes: Time with family and friends, Sunderland FC, England rugby
Dislikes: Time-wasters, spinach, Pernod
Book: Any of the Jack Reacher novels by Lee Child
Film: Lord of the Rings
Album: Raintown by Deacon Blue
Career ambition: I am doing it - making a difference and doing something I am proud of
Life ambition: I am doing it - a great family, great friends and being happy
If I wasn’t doing this, I would be…a game ranger in South Africa