Familiar red ‘M’ adorns branch in London
Friday, August 27, 2010 12:00 AM By Tim Stuhldreher
Britain’s first new retail bank in more than a century has opened – and it sports a familiar name and logo.
The bright red “M” that identifies Metro Bank‘s headquarters in Swatara Township also adorns the Metro Bank plc branch that debuted July 29 in central London. Inside the British bank, customers will find services and amenities like those in the more than 30 Metro Bank branches across central Pennsylvania.
The British Metro Bank plc website is a splashier version of its American cousin. The latter, however, includes the following unambiguous disclaimer: “Metro Bank is a wholly owned subsidiary of Metro Bancorp Inc. and is not affiliated with Metro Bank plc, Great Britain.”
That’s right, they’re not the same bank. But they share the same founder and the same vision.
“Our job is to eliminate every stupid bank rule we can find,” American entrepreneur Vernon Hill told the British newspaper The Daily Telegraph in February.
That was Hill’s strategy when he founded Commerce Bank in 1973 in Cherry Hill, N.J. Hill, a veteran of the fast-food industry, saw no reason banks couldn’t be just as convenient. Commerce Bank stayed open seven days a week and offered free coin-counting machines and other perquisites, including complimentary biscuits for customers’ dogs.
Commerce Bank grew rapidly, spinning off Commerce Bank of Harrisburg in 1985 as a separate franchise. The latter bank rebranded as Metro Bank in 2009, while the New Jersey bank was absorbed into TD Bank, the American subsidiary of Canada’s TD Bank Financial Group.
Hill left the first Commerce Bank in 2007 after a run-in with federal regulators – the two events aren’t related, and he was cleared, he has said – and he hatched plans for his British bank soon after.
Metro Bank plc – the suffix is short for “public limited company,” the British designation for a publicly traded, limited-liability company – has been in the works for more than two years, according to the company. It and its American counterpart have formally agreed to share rights to the Metro Bank brand.
“Metro Bank in Central Pennsylvania has exclusive rights to the brand in the United States,” said Gary Nalbandian, bank chairman, president and CEO.
Extending a brand like Metro to new markets is smart business strategy, said Ralph Olivia, a professor of marketing and executive director for the Institute for the Study of Business Markets at Penn State’s Smeal College of Business.
Brands such as Metro have value because they create relationships with consumers, Olivia said. People associate the Metro logo with a particular style of banking, so it makes sense for Hill to use the same trademarks to signify the same brand experience, even though Metro Bank plc is technically a different bank, Olivia said.
“I applaud him for using the same logo and logo mark. … He’s making good use of the identity,” he said.
“Creating a new brand from scratch takes a lot of money,” he added.
David Taylor, president of Taylor Brand Group in Lancaster, called the arrangement “kind of unusual,” but said he doubted there’d be much confusion, given the distance and limited contact between the two markets. A few overseas tourists might stumble upon an ATM, or an Internet user might visit the wrong website, but such incidents are likely to be infrequent and readily resolved.
Taylor concurred with Olivia regarding the astuteness of porting the Metro Bank identity.
“It’s convenient to be able to carry (the Metro brand) over there and set it up again,” he said.
Hill and his British partner, Metro Bank plc co-founder and Chairman Anthony Thompson, said they’ll open a second branch next week, two more by the end of the year and 200 within a decade. They say Britain’s stodgy, outdated banking culture is overdue for the fresh, consumer-friendly Metro approach.
The new bank is turning heads, said David Black, a banking specialist with Defaqto, a financial services company based in London.
“They got an incredible amount of publicity, which was very impressive,” he said.
Still, Black said he thinks Metro Bank plc faces an uphill battle to gain significant market share. For one thing, its interest rates on deposits are lower than competitors, and British consumers are savvy, vetting bank products via online “best-buy tables,” he said.
In addition, Metro Bank plc requires consumers to visit a branch in order to open an account, he said. They can bank online after that, but other banks let customers sign up online, he said.
“It’s unusual to have something purely branch-based,” he said. “It really reduces the potential catchment.”
But the branch component was essential to Commerce/Metro’s success in America, said Joseph Fenech, an analyst who follows the bank for investment banking firm Sandler O’Neill and Partners.
The Commerce/Metro model is to lure retail customers with branch amenities and quality service, Fenech said. Their deposits give the bank low-cost capital, more than making up for the higher cost of building outlets, he said.
Weekend hours, 15-minute turnaround time on debit card issuances and other perks will more than make up for slightly lower interest rates on deposits, Metro Bank plc executives say.
Surveys show fewer than one in six consumers considers interest rates the most important factor in choosing a bank, Thompson told The Daily Telegraph.
“Customers tend to love service,” Fenech said.