Relationship banking

Public distrust of the banking system has opened up a window of opportunity and Vernon Hill has been keen to take it. In doing so he wants to help other businesses learn from how he has built a thriving business in the middle of a global recession.

Hill is founder of Commerce Bank in the US and co-founder of Metro Bank in the UK, the country’s first new bank since 1830.

Metro Bank’s USP is customer service which he feels has been sadly lacking in the banking industry.

Hill’s model, which is based on decades of experience with Commerce Bank, is very much influenced by retailers like McDonald’s, who he worked with during his early career in real estate, and by major successful brands such as Apple. He calls his banks shops and staff who work in them are team members who are required “to solve customers’ issues and if they can’t to find someone who can”.

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“I look at banking as a retail business and have sought to redesign it for customer convenience. There are so few banks in the UK that they can operate like a kind of cartel, overcharging, underinvesting and underserving their customers,” he says.

He adds that Metro Bank, which was launched in 2010 as a high street bank in London, has done better than he expected with 130,000 accounts having been opened already and he feels that is in part due to the timing of the launch – after the failure of several banks – and also due to customers being fed up with banks that didn’t put them first. He says that half of Metro Bank’s customers are businesses and that there is a gap in the UK for business banking, especially for SMEs.

Relationship banking
Metro Bank aims to work with businesses to try and “change their experience”, but Hill says businesses’ problems with banks lending to them are not entirely banks’ fault.

“The burden is on both sides,” he says. “For many people who start up businesses it is the first time they have borrowed serious money and while many have a good coherent plan, others don’t have any experience. They need educating about how to build a business.”

Hill is very keen on increasing Britons’ financial knowledge and has funded a series of classes in London schools on money and business. He has also given a lot of talks on the subject and has just published a book, Fans not customers, which sets out not just the rationale behind his own business, but seeks to show how to create a successful business in a no-growth economy.

He says many businesses fall at the first hurdle because they do not ask where they add value to what already exists on the market and do not have a clear idea of how they will make money.

His book talks about the major brands like Apple. “Apple has repackaged various computer parts and made them not only easy to use but a fun experience. When you say John Lewis people smile. Great brands offer a better experience and build fans who get others to switch to them,” he says.

He adds that offering cut price services is not the way to build a long-term business. “It’s about offering something that customers value,” he says.

Metro Bank’s plans for the next four to five years are to have around 200 ‘shops’ spread across the south east, from Milton Keynes to Brighton. Most of the bank’s employees, including store managers, are women and the bank, which has 640 team members currently, plans to double that number over the coming months, offering a range of full- and part-time jobs.

As it is open seven days a week, from 8am to 8pm on weekdays, 8am to 6pm on Saturday and 11am to 5pm on Sunday there are likely to be opportunities for flexible working, says Hill. And he says that because the bank is growing so fast the chance for upward mobility is high.

“In the US the majority of our employees and managers are women. Women tend to be our customers as they pick the consumer banks so our employees reflect that and they tend to have great customer service skills,” says Hill.

*Fans not customers: how to create growth companies in a no growth world is published by Profile Books, price £11.99.

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