Exclusive: ‘The halo effect’ – Matthew Williamson, Mobiquity and Ian Walters, Metro Bank in “The Fintech Magazine”
Ian Walters is MD of Distribution at Metro Bank, the first new bank on the UK high street in 100 years and it’s committed to staying there. Matthew Williamson, VP of global financial services with Mobiquity, is focussed on helping banks be their best digital selves. We brought them together to ask, post-pandemic, is there room for both?
We’re used to hearing that banking’s digital transformation has been hastened by COVID-19, but there’s no denying that on otherwise shuttered high streets, socially distanced queues outside bank branches stubbornly persist.
Some say that the pandemic will prove the death knell for the physical branch; others argue that customers’ needs are more nuanced. Either way, the Financial Conduct Authority urged UK banks, such as Co-Op, which announced in August that it would lose a quarter of its estate, to reconsider closures during lockdown in order to adequately support customers. Its call reflected Metro Bank research from August, which highlighted public concern that the remaining 6,000 branches in the UK bank estate were rapidly disappearing.
“Some 44 per cent of people have been impacted by bank closures or reduced opening times during the pandemic; with 48 per cent also worried that banks will continue on reduced hours or even close altogether,” says Metro Bank’s managing director of distribution, Ian Walters.
In the battle between bricks and clicks, this bank is determined to straddle both, citing the ‘halo effect’ it sees created by having, simultaneously, a strong physical and a strong digital presence.
Metro Bank is perhaps best known for becoming the first new bank on the UK high street for more than 100 years when it opened in Holborn, London, in 2010. As its incumbent rivals started to withdraw from the high street and move services online, Metro committed to an ambitious store opening programme alongside investment in digital channels. There are now 77 stores, two opened during the pandemic, with a commitment to launch another 15 by 2025.
“Our philosophy is that the customer should choose how they do their banking,” says Walters. “So, we aim to give a great service across all our channels – physical, the app, mobile, and telephone.”
Mobiquity, which positions itself as a full-service digital transformation enabler, has successfully worked with banks around the world to ensure the branch fits into just such an omnichannel strategy.
“A successful branch strategy will leverage technological innovations with a human-centric approach to solving frictions with accessibility, processing time, and the bottleneck associated with current branch banking,” says Matthew Williamson, VP of global financial services at Mobiquity. “It should be able to transfer a transactional relationship to a personal relationship, as well as addressing the scalability challenges with the support of digital innovations.”
At the Bank of the Philippine Islands (BPI) Mobiquity did just that by integrating many branch-based features into a new digital banking platform, BPI Online. Now, customers can use BPI Online to book branch appointments, reorder cheque books and schedule financial transactions.
But the direction of travel in banking is clear, says Williamson. He points to research by personal finance website Finder, indicating that nearly a quarter (23 per cent) of consumers in the UK opened an account with a digital-only bank last year. It suggested more than 1.4 million Brits could stop using branches altogether as a result of new patterns of digital behaviour established during the pandemic.
“The convenience and ease of digital banking may mean that many people who used digital banking solutions for the first time during the pandemic, will not go back to visiting their bank branches as frequently,” says Williamson.
Instead, the branch will come to them.
“We can visualise the emergence of a completely different branch model. Digital has the potential to dissolve venue-based limitations, enabling banks to access their customers and provide a quality customer experience in a café, on a train, at home – anywhere. Customers can, in effect, take the branch with them,” says Williamson.
And he suggests banks could incentivise their customers to adapt this new reality.
“For example, you could go into a Starbucks and order a coffee. While you’re waiting, you could check your bank balance via an app and get a notification from your bank that they would like to speak to you. With access to your bank account, they know you’re in Starbucks and they offer to pay for your coffee as an incentive.
“With mobile banking apps, many consumers are already checking their bank accounts when they’re out so we aren’t that far from expanding this capability further. The bank of the future will be service-based, rather than venue or channel-based.”
Despite COVID-19 disrupting normality, Walters would argue that ‘customer needs haven’t actually changed that much’.
“We did some independent research in August that revealed 51 per cent of people like to speak to someone face to face. When you look at the over-55s, that increases to 61 per cent,” he says. “So there’s a big chunk of the population that needs that personal interaction.”
Rival banks, however, have been cutting their branch network for years and were planning to downsize further as the crisis hit – 400 had closed in 2019. But with high street real estate values collapsing, a dearth of businesses willing to take on a lease, and the massive shift away from central office space, suddenly those branches are seen not as an albatross around banks’ necks, but perhaps a solution to a new problem.
In August last year, Metro Bank’s CEO Dan Frumkin, was quoted by the Financial Times as saying that, in the long term, spreading employees across branches would help cut operating costs, reduce the organisation’s carbon footprint and make it easier for branch staff to move to jobs that would previously have been based at head office. Virgin Bank and Lloyds Banking Group are said to be similarly adapting branches to suit just such a ‘hub and spoke model’ to support flexible, more socially-distanced working than could be achieved in large, centralised administrations.
Williamson acknowledges there is still a place for a ‘hybrid version of banking’ – where the digital meets physical. But not delivered through a traditional branch.
“As digital banking solutions become more popular, there will be a greater premium for the traditional banking experience,” he suggests. “We could expect to see a community financial services hub, which will be a collaborative project between banks where they occupy the same retail space. Customers will be greeted by a digital assistant to assess who you are, what bank you’re with, and if they can service you. Instead of eliminating the branch entirely, the financial services hub could help banks retain this USP to carve out new revenue opportunities while still provisioning for customers who require face-to-face banking, such as older and vulnerable people.”
Metro Bank believes banks do indeed ‘have a responsibility to support local communities as well as the local high street’, says Walters. Its seven-day-a-week opening times and in-branch community facilities are all predicated on that belief. And what’s interesting is it appears to chime well with digital customers, too.
“The presence of a store in a town enables stronger growth in digital channels,” says Walters. “We’ve observed that if we open a store we see a ‘digital halo’ effect – our digital account opening typically doubles as well as customers continuing to open accounts in store. So we know that the presence of a store is an important factor in the decision to become a Metro Bank customer.”
The bank’s customer satisfaction ratings seem to bear that out. A 2020 Ipsos Mori poll carried out for the Competition and Markets Authority showed that 84 per cent of Metro Bank customers – the highest of any bank – would recommend its branch service and it was also the only bank with its own branch network to appear in the survey’s ranking for best online and digital banking, with 85 per cent of digital customers saying they’d recommend it.
So, what of the future?
“What is undeniable is that, in response to changing market conditions and consumer behaviour, banks across the globe are adapting their branch strategies,” says Williamson. “In particular, they are looking at their market segmentation to determine the strategy that they will take. While some are doubling down on their core base, others are looking to target millennial consumers. By leveraging digital branch banking strategies, banks can bridge the behaviour of different age groups while also accelerating customer accessibility and satisfaction.”