5 key takeaways from Metro Bank’s meteoric rise
Handily, Vernon Hill gives us this straight up, but I will simplify slightly:
- Be different — and make your differences your brand
- Engage your employees with the brand
- Design is a competitive weapon
- Make people fans of your company and you’ll grow naturally
- Retail brands have been doing this for years, so should everything else.
The key takeaways below are proof of these bullet points.
What you need to know before reading this book:
Mr Vernon W. Hill II left college and founded a real estate firm, assisting businesses to find the best locations, specifically none other than McDonald’s in its early days.
He then moved to start his own bank — Commerce Bank — by getting his friends in a room after asking a bank how much they would loan each person.
He saw what McDonald's had done — retail principles of making things easier — and looked at how impossible banks were. This was 1973.
By 2007, Hill had 440 stores and provided shareholders a compounded 23% increase on investment.
He then moved to London, UK, where there hadn’t been a new bank in over 100 years… to start a new bank. In the first 5 years, it doubled in size, every year to be one of the biggest in the UK.
Key takeaway 1: Banks should be like fast food
Operationally: No more appointments; opening accounts and other actions are completed in 15 minutes; accounts are available immediately; branches are open when you need them and located in the areas you go to most often. Not a UK resident? Not a problem.
Metro also has an unusual take on the use of safe deposit boxes; they are visible in the front of the shop. Want to access it? Come in anytime, bring your key, Metro has theirs. Deposit boxes alone pay Metro’s rent they are in such high demand!
The most shocking likeness Metro has to a fast food restaurant is it introduced the UK’s first drive-thru bank.
Design: Vernon himself even admits McDonald’s and Burger King’s influence in ease for customers. Everything is designed for customers.
Each building’s architecture includes lots of clear glass for transparency, with vibrant colours and fun areas. The branding is bright to be recognisable and to highlight the differences Metro has from a ‘normal’ bank. The buildings have zones of deposit boxes, change machines, ATMs, questions desks, and children's area.
They even have their own, somewhat terrifying, mascot that helps entertain and teach children how to use the children-specific services of the bank — such as the magic money machine or opening your child’s first bank account and teaching them what it does!
Local: The model is flexible so that local people could be themselves at work and serve their area freely, but strong enough to empower them to do so.
This itself was learnt from the early days of McDonald’s where the franchise owner would serve a community and invest in that community with events and support of local causes.
“…we wanted local people with local flavour in each market — running our model…”
Competition: Metro, like McDonald’s, do not compete on price, they compete on service. There are different products, but not many. Their rates are simple and will not be the cheapest/best returning. They will be though the most attentive to your needs, so says Vernon. He gives an example of shaking hands and saying no to a deal, for them to return 3 months later after the other company tried to change their “better” rate.
Key Takeaway 2: Metro focused on deposits instead of lending
Banking is essentially comprised of two things: lending money and storing money.
Most banks focusing on making money from lending (think loans and mortgages). This means they need to be inquisitorial to ensure their risk isn’t too high in order to make a profit.
Most of the population will use the deposit services more often than the loans and mortgages and hence will get their value from these interactions.
The issue is this misalignment. The bank wants you to apply to use their services because they immediately think of lending as a default way to do business, yet the customer is the one wanting to deposit money and has all the power. In short, the customer wants to give the bank money, but the bank wants to investigate the customer.
Commerce Bank and Metro Bank focus on deposits as a default. They offer better user experience and care with a focus on real customer actions, while optimising how much deposits cost them.
As such, there is little cost associated with storing deposits, while customers are turned into fans over the level of service they get in-store.
Key Takeaway 3: Keep staff engaged with culture
Vernon talks about his “Branch Hunt” game. Staff are given $500 and are told to go open two bank accounts. Then they come together to review what they learnt.
This game alone is a great insight into how Commerce Bank’s culture worked.
Vernon, throughout the book, gives an example of how the Metro employees are doing incredible things that are turning customers into fans: going to restaurants for customers, keeping children entertained, keeping stores open late for customers, returning trinkets from coin-counting machines, hand-delivering to homes, paying for flights, taxis, and trains when something’s gone wrong.
Metro teach this culture using this mnemonic, “AMAZE-ING”:
- A — Attend to every detail: organisation, details, presentation
- M — Make every wrong right: if something breaks, find another way
- A — Ask if you’re not sure: nothing is set in stone, just ask
- Z — Zest is contagious: happiness is contagious, have celebrations and give
- E — Exceed expectations: do more
- I — Inspire colleagues to create fans: make people AMAZEING
- N — Nurture colleagues so they grow: help improve the people around you
- G — game change: adapt to support customers
For example, fulfilling I and N, in order to be promoted, your current role needs to be replaced:
“…What have you done to grow a successor?…”
AMAZE-ING is as present in their employees as it is in the hiring process, as a way to investigate culture fit. For example, Zest is contagious is evident from:
“…If you’re not smiling when you’re trying to get the job, what’s the likelihood of you smiling when you’re working…”
When people don’t fit or aren’t happy then that’s fine too, says Vernon. If someone doesn’t seem to be a good fit, the company is open about what is lacking in clear simple language and will support the decision the individual makes.
Vernon is also a strong supporter of stock options, encouraging employees to engage with the brand and be entrepreneurial in delivering great service.
Key Takeaway 4: Fans vs Customers
Fans are in your brand's community, they love what you do, and they want to convert their friends.
In order to create strong fans of the brand, Metro staff go through thorough customer assistance training. This is formal training but it is also part of their culture. Metro employees have a Forbidden phrase list, which stems from the idea that the customer is receiving a service and hence, they shouldn’t have to do anything:
In fact, before an employee says no to a request they are told to “bump it” to a supervisor and that has lead to more human decision making that converts customers into fans, like paying for trains of taxis when customers have been in trouble, which gives employees the freedom to go out their way to help customers.
Key Takeaway 5: If you hope, you have lost control
“…Don’t dream about execution — execute….”
You can always do more to gain control or influence. If you are now merely hoping, you are accepting that you have lost control.
Think about what could help, make a plan and then measure the objectives.
A reflection on the current state of UK banking
Metro Bank started in 2010 and had meteoric growth. This book was written in 2016. 2017 and 2018 saw the rise of FinTech banks.
The largest differentiator here is they are digital-first. If customers wanted better access to their funds, nothing is more convenient than their bank being on their phone.
These banks give immediate notification to customers and have expanded how people can view their money in a more accessible form than ever before. And with this, they have the scalability of tech without the costs of physical stores or many employees.
At the same time, more classical banks have noticed this customer-first way of working and, slowly, have started to improve to focus more on customer experience.
Though the lessons of this book are all still true, the actions taken from the insight are starting to seem potentially less relevant than before.
In 2019, Metro conceded a reporting error and have subsequently had a lot of pressure, which has hit the stock price dramatically. There is still demand from the part of the population for banks to be personal, present and physically accessible, a demand which the FinTech banks can’t yet satisfy.
In 2020, Metro seem to be one of the biggest winners in consistently convincing customers to move over to them. They also have a strong digital arm which provides strong standings against the FinTechs.
An interesting 200-page read of a CEO that clearly spotted Retail and Fast Food trends and could learn them and apply them elsewhere.