Craig Donaldson isn’t your traditional banker. He supports Sunderland AFC, he cycles his Brompton to work and he refers to Metro Bank as his third child. A maverick, maybe, but he’s doing a great job as chief executive for the shiny new entrant to the UK high-street banking landscape.
Whatever your views are on the UK’s first ‘new’ bank in a generation, it’s hard to ignore Metro Bank. Not only are the branches – Donaldson refers to them as “stores” – decked out in bright blue and red decor, and therefore impossible to miss, but the bank’s expansion throughout the Southeast is prodigious.
Since launching in Holborn in 2010, Metro Bank has opened 31 branches, spreading from Hounslow to Croydon, and from Milton Keynes to Reading. Donaldson’s vision is to expand it to between 300 to 350 stores by 2025/26, which seems a frankly terrifying yet awe-inspiring feat for such a new bank.
The “Northern boy” was approached by Vernon Hill, chairman of Metro Bank and veteran retail banker, with a proposal to set up the new bank. Hill – a dog lover, which explains Metro Bank’s famously dog-friendly stores – is something of an old hand at setting up high-street banks, having set up the wildly successful Commerce Bank in America.
Launching the UK’s newest bank took a dizzying few weeks of flying back and forth over the pond, setting up meetings, raising seed capital and “arguing”, Donaldson laughs. “Then we came back, went to Tottenham Court Road, bought a laptop and started to build a bank.” He makes it sound almost mundane – despite being the only bank to gain a banking licence in the UK in more than 150 years.
Beneath the marketing puff – dog bowls in stores, free lollipops, cheery initiatives such as a free dog or cat from Battersea when you sign up as a customer – Metro Bank is really a very good idea. Donaldson adds: “What we do is simple: we are bloody good bankers. We don’t do wealth, we don’t do investments, we don’t do pensions, we don’t do insurance. We want to do your banking.”
Crucially, the bank is funded by its customers, and doesn’t get involved in wholesale markets. That’s great, I say – but how do you make any money? As a recent start-up, Metro Bank isn’t profitable yet, although Donaldson is quick to reassure me that it is “heading towards profit” – the bank just reported its sixth consecutive quarter of declining losses – and is looking to list “probably in 2016”.
Metro Bank’s success is partly thanks to the zeitgeist of mistrusting UK banks. It doesn’t have to spend big bucks on advertising – last year, it spent less than £60,000, Donaldson tells me – but the PR spin of being a retail-only, customer-focused bank is far more valuable. “Everybody knows banks aren’t trusted,” he says. “I could spend money advertising whatever across the road, saying ‘I’m this’, but people don’t trust banks, so it’s better if I deliver to a customer, that customer becomes a fan, and they tell their friends I do a great job.”
If you lose your wallet on a rowdy Saturday night, roll up on Sunday and get a new card printed
Despite still running at a loss, the numbers speak for themselves: 447,000 customers (almost 200,000 joined last year, according to Donaldson) and £2.9bn worth of deposits at the end of the fourth quarter. Around 18 of its stores are now profitable, and its Cheapside branch was turning over a profit in six months, he adds. “So how do we become profitable?” asks Donaldson. “It’s simple. We look after customers and we give them great service.”
The “great service” he references frequently is, in part, Metro Bank’s unique super-fast account sign-up process. Cards are printed in store, signatures signed digitally on tablets and all the information emailed, rather than sent in the post. In fact, Donaldson says that 89% of customers opened an account in less than 30 minutes during the first half of last year, and 77% in less than 15 minutes. And if you lose your wallet on a rowdy Saturday night? No problem – stores are open seven days a week, so just roll up on Sunday and get a new card printed there and then. “It’s about trying to make customers’ lives easier,” Donaldson says.
Innovation is where Metro Bank differs most from the big four. There are no paper statements, and if you lose your card you can block your account via an app – and then unblock it if you find it again. Your account is linked to your mobile phone, so when you call up the operator will see your picture. It sounds creepy, “but it makes a big difference for customer service”, Donaldson insists.
Then there’s the ten-minute rule, which means opening the doors ten minutes before the official opening time and closing ten minutes after, to better fit around working hours. (This is on top of staying open from 8am-8pm Monday to Friday.) This is particularly useful for SMEs – of which Metro Bank counts many as customers – as they can bank cash at the end of the working week, rather than at the beginning of the next. “Banks should be open when customers want to be served,” Donaldson argues. “There are so many stupid bank rules, and a stupid bank rule is opening nine to five, Monday to Friday.”
It’s no secret that the big four banks have cornered the majority of the market for years – so much so that the Competition & Markets Authority announced an inquiry into banking competition at the end of last year. Donaldson, understandably, welcomes the move from the watchdog. “I’m concerned that people think that competition is more of the same. It’s not. We do not need another ‘me, too’ bank. We need change, innovation and choice.
“We need reasons for people to switch, and we think Metro Bank provides that. But what we don’t need is just one other big player. What we need is a really competitive marketplace, with lots of different companies offering innovation and different approaches.”
Donaldson has always worked in retail banking, despite saying he got his first bank job by “copying my best mate’s application form”. He’s worked for Barclays in London and Kenya, as well as across the HBOS brands. He left HBOS, post-financial crash, becausehe wanted to “be proud of what I do”.
“I learned a lot during that period, but nobody can be proud of what happened, and I want to do things I’m proud of,” he reflects.
“I wanted to do something that I believed is the right way for banking to be done, and that’s why I came to do this – because I believe that we should focus on customers. At the point at which the markets gave banks more money than the customers did, guess what became more important?”
Later on, I find out that alongside traditional senior management, Metro Bank has a ‘chief canine officer’. It might be hard to take that kind of thing seriously, but as Metro Bank’s star continues to rise, this is one banker you don’t want to underestimate.
For more information, visit metrobankonline.co.uk
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