Metro Bank is the first high street bank to launch in Britain for more than 100 years. It is offering retail opening hours, unparalleled service and a simple range of products that will be suitable for everyone. It also promises customers that it will take just 15 minutes to open an account in one of its branches, including obtaining a credit or debit card, which will be printed in store.
The founder Vernon Hill and co-founder Anthony Thomson, who is chairman of the Financial Services Forum, plan to open 10 branches in Greater London during the coming two years. Metro bank intends to personalized business banking services, with local managers making decisions on loans for local companies.
In the plus side:
• The branches will have lavatories
• It will allow dogs and will provide them with a bowl of water and a bone
• It will have free coin counting machines
• It will have safe deposit boxes that can be rented out for £100 a year.
In the negative side:
• It will have a three-year fixed rate bond paying only 3pc, significantly below the market leading rate of 4.3pc.
• It will give a two-year variable rate mortgage for someone with a 40pc deposit of 3.5pc, while a two-year fixed rate deal for the same borrower is 4pc, compared with best-buy rates of 2.29pc and 2.99pc respectively.
• It will raise its mortgage rates by 1pc for people looking to borrow up to 80pc of their home's value.
• The group's current account charges interest of 15pc on overdrafts, compared with an industry average of 14.1pc
• It will provide an instant-access savings account offering a return of just 0.5pc, compared with a best-buy rate of 2.8pc
The bottom line is Metro bank is betting on costumer service while sacrificing a competitive interest rate. As Michelle Slade, of Moneyfacts.co.uk, said: "Although they are offering all these other benefits, such as longer opening hours, one of the main things for people is a competitive interest rate. If they haven't got at least a reasonable rate of interest people will discount them. They are going to struggle to get market share."
Source: BBC News, http://www.bbc.co.uk/news/business-10790996
This article brings up an interesting business question. Are consumers more motivated by the product, or the additional benefits? I would guess that consumers are not going to be interested in the public relations ploy, and this bank may struggle in the near future.
ReplyDeleteAlso, I'd imagine that there will be some speculation regarding the reliability of the new bank. Will consumers feel safe putting their money into this new bank? These are questions that will determine the bank's success in the future.