First new High Street bank in UK for over 100 years opens

News - Banking

Written by Ray Clancy

Friday, 30 July 2010 10:46

It is the first new High Street bank to be opened in the UK for more than 100 years and staff were all smiles yesterday when the first customers came through the doors of its new branch in Holborn, London.

Metro Bank has lots of gimmicks, such as providing lavatories for customers and allowing dogs inside branches and even providing then with a bowl of water and a bone. On the perhaps more important financial side it promises to revolutionise banking with retail opening hours and a pledge that customers can open an account in just 15 minutes including obtaining a credit or debit card, which will be printed in store.

But its financial products have received a lukewarm response from industry commentators with none competitive enough to make it on to the best buy tables, with others paying below the industry average.

Kevin Mountford, head of banking at moneysupermarket.com, said the launch of a new bank is welcome, but unlike Tesco and Virgin which have the ability to create large scale banks relatively quickly, Metro faces a difficult task on its hands as it has to build a brand and customer base from scratch.

‘It is difficult to see where Metro Bank will distinguish itself from its competitors. It has been open in stating that it won’t be chasing customers through the use of best buy products; instead it will focus on service and doing things differently. The challenge for Metro Bank is putting this into practice,’ he explained.

He pointed out that going into a branch will be easy for customers in central London but the lack of online account opening facilities will really restrict the growth opportunities.

He added that gimmicks are all very well for publicity purposes ‘but customers will need to ensure they are getting the best deals available and the right products for their needs rather than being fooled by the sparkling new shop front and traditional banking approach. There is already a great deal of competition in the UK banking market and consumers should take this opportunity of a new entrant to re-assess their financial products and ensure they aren’t missing out on a better offering,’ said Mountford.

According to research by uSwitch.com, the independent price comparison and switching service, 57% of banking customers are looking forward to having a real alternative to existing high street banks, but only 38% would consider moving their main current account to a brand new bank.

‘Despite the fanfare this might not be the full scale banking revolution consumers have been waiting for. Metro bank never claimed it would offer the best products on the market. Its selling point is its convenience and customer service. Bu unfortunately its products don’t quite match up,’ said Dilshad Issa, personal finance expert.

Issa pointes out that its Instant and Young savings accounts are not nearly competitive enough to attract savers purely interested in getting the best deal and while its mortgages have a competitive arrangement fee of just £500, they are only really an attractive option for the few who have large deposits.

‘The flat rate of 10% on loans, regardless of the size, isn’t really competitive for those taking out a larger loan, say above £5,000. However, for anyone looking to borrow less, this is a rate not currently matched on the high street. The packaged current account is also quite competitive, and the credit card offers a reasonable standard rate. However, a distinct lack of introductory offers means that many savvy consumers will find a better offer with the traditional banks,’ added Issa.

Metro Bank plans to open a second branch in Earls Court next month and expand its network to more than 200 outlets within the M25 during the next decade.