British retail favourite M&S is now ready to take on mainstream high street banks in what could become a battle of brand authority.
M&S has a distinguished history of over 25 years in personal finance. The firm launched its Chargecard in 1985, before adding personal loans to its repertoire in 1989.
The financial arm became M&S Money in 2003, and was then purchased by HSBC a year later for £762 million. It currently offers credit cards (with three million active customers), savings accounts, ISAs and insurance.
The step to become a fully-fledged banking operation will see M&S Money offer current accounts from the Autumn by opening branches inside its stores, beginning with Marble Arch next month. It also plans to offer mortgages at some point in the future.
Providing the launch is successful, M&S will hope to steal a march on other diversifying rivals. Supermarket giant Tesco has found the move towards current accounts too hot to handle – temporarily at least.
Best of British
As we’ve pointed out from time to time – most notably during the ISA season – we are not a nation of people that tends to chop and change our financial service providers. M&S knows that it has to offer something different if it hopes to attract custom away from mainstream high street banks.
That it’s a strong, established, trusted, and inherently British brand is a good start – not least because the approaching denouement to the Eurozone crisis has raised concerns about the protection of deposits from overseas banks. And it’s also a good time, in Jubilee celebration week, to appeal directly to British patriotism.
But M&S knows it has to do much more than this, with Tesco and Sainsbury’s both strong competitors. Hence, it has decided to brand around the principles of “relaxed” and “modern” banking. In other words, it intends to offer a range of services to customers’ convenience, and remarry the idea of banking with customer service.
How will it manage this? For starters, its facilities. Typical M&S Bank in-store branches will offer private discussion areas, self-service facilities, and retain their hundred-plus bureaux de changes outlets.
Secondly, through access. Ambitiously, M&S pledges that its counter services will mirror store opening hours – including weekends – which could see them providing twice the number of available hours as mainstream banks. Customers will be able to access account services by telephone through UK call centres, as well as through internet banking.
M&S will be confident, then, that a fair number of its three million credit card customers, and plenty beyond, might be tempted to jump ship to the new current account, which will allow pre-registration in July.
M&S Bank. Advantages:
- Strong brand, with competitive existing products.
- Ready to launch, unlike Tesco (now two years behind its launch plan).
- Open seven days a week – beyond what most high street banks can offer.
- More diverse, personalised services, including its Bureaux de Change.
- Retail incentives for M&S customers.
Shortly after assuming his position in 2009, M&S Money Chief Executive Colin Kersley described the company as the UK’s “most trusted” retail brand, with a “unique customer base”.
“It’s about building what we’ve got and keeping our offering unique”, he discerned.
Now, he clearly believes that existing customers with the store will be “genuinely excited” at the prospect of banking with the store.
“With over 25 years financial services experience, M&S Bank is the natural next step for M&S Money and will provide customers with a credible, alternative choice in the banking sector”, he said.
Competition: Metro Bank
And credibility is precisely the point. As a premium brand, it is difficult to expect M&S to compete at the very top of all of its respective markets – though its strong flat-rate cash ISA at 3% cuts through a lot of the exploitative bonus-heavy products churned out by high street banks.
M&S Money. Current offerings include:
- Credit Card: 0% purchases for 15 months. 15.9% APR (vs. average of c.17.75% for consumer reward cards).
- Cash ISA: 3% standard rate [no bonus].
- Independent FSCS registration. [Why is this important?]
M&S Bank’s new offering is unlikely to add the pizazz shown by Santander’s 123 current account, for example. But that doesn’t mean it cannot compete.
In some ways, one might argue that the stage is set for M&S Bank. Santander’s customer service often polarises opinion, and, as alluded to above, savers are not hugely confident in European ownership right now.
Santander has faced questions recently about the autonomous strength of its UK-based subsidiary, despite the fact that the Financial Services Compensation Scheme secures savers’ personal deposits for up to £85,000. The Bank of Cyprus, meanwhile, has hurriedly sought FSA sanction for a UK-based subsidiary of its own, to reassure its 50,000 UK savers that their deposits would be covered by the British FSCS compensation scheme rather than the more nervously positioned Cypriot Government.
So, aside from its inherent Britishness, what M&S Bank appears to be emulating is the consumer-driven, personalised banking approach shown by new foreign entrants to the market, such as Metro Bank and Handelsbanken.
Metro Bank has 12 branches throughout Greater London. Its fervent “community” approach, which also sees its branches open on evenings and weekends, appears to be slowly delivering on its pledge to revolutionise retail banking. The bank is currently adding 1,000 new accounts per week to its books. It plans to open 200 more within the next 10 years.
Metro has fashioned itself as friendly and personable – and the pet lovers’ bank – by accepting dogs inside branches (and even providing facilities for them). It’s also FSCS protected in the same way as domestic banks.
- [+] Open 7 days a week.
- [+] Appeals to dog owners / pet lovers.
- [+] Strong customer service mandate.
- [-] Not fully established in the UK.
- [-] Not able to grow rapidly.
Metro has set the tone, but it’s not in a great position to expand quickly upon what it’s started. M&S Bank senses the change in sentiment. With an already established brand, hundreds of exciting stores, and a strong customer base, the right branding could easily see M&S Bank hop on the revolutionary trail much further up the ladder. With Tesco still some way behind launching their current account, it’s a classic case of carpe diem for M&S.