You may not have heard it above the recent storms, a distant but unmistakable rumble – the first shots of a revolution in High Street banking.
War councils held by the main lenders in the UK, including pow-wows in Cambridge, have identified that the so-called challenger banks pose a growing threat to the status quo.
That threat increases the more the Government of the day insists on diluting the market share of the major players.
Business Weekly has learned that the American-born Metro Bank is looking to open its first branch in the Cambridge technology hotspot. This is indeed a challenge.
Founder Vernon Hill’s model is based on alien concepts to many High Street lenders – longer opening hours, better customer service – rather than an overtly commercial approach.
It certainly worked in the land of king dollar where Hill built Metro Bank into a $multi-billion empire.
Now – just four years after launching in the UK with four London branches – Metro is fast-tracking plans for Cambridge and wants to open more than 200 outlets in the next six years.
The model turns traditional banking on its head – based on service not price; building a physical presence in the High Street as the current major players close more and more of their branches.
I am told that the market leaders have been warned in strategic meetings up and down the country to prepare for the worst – a Labour victory in the May General Election, possibly via a another coalition. The banks’ strategists have intelligence that Ed Miliband intends to force the big boys to shed even more market share.
That will ease the path to growth for players like Metro. Cambridge, as Europe’s innovation capital, remains in the vanguard of a fast-changing marketplace. Spanish bank Santander has in recent years been hoovering up accounts eschewed by the toffs among the tellers.
Swedish-owned Handelsbanken decided in the mid-1990s to push beyond the shores of Nordic lands and target other high-growth regions of Europe. Cambridge and the East of England was one of the first new territories where Handelsbanken put down roots and I am told it is now looking to add a South Cambridgeshire office to its central Cambridge base, subject to finding suitable premises.
Cambridge & Counties Bank has added more spice to the pot: It represents a unique partnership between two established and respected institutions – Trinity Hall, Cambridge and Cambridgeshire Local Government Pension Fund. It has become a banking specialist for SMEs within the UK and tells us it is lending record amounts.
Again it will be well placed if a Labour government forces Barclays, Lloyds and others to cut market share. There is another twist here, though. Santander has grown so strongly that it is now in the so-called ‘Big Five’ with HSBC, Barclays, RBS and Lloyds – that hold 85 per cent of the UK market for current accounts. So branded helmets will also be required in the Santander trenches presumably.
Affairs of commerce are seldom straightforward and there is also a clear anti-competitive element in the Miliband manifesto regarding banks‘ market share.
Why should respected lenders who have got their houses in order chase more SME business if gains will just be scythed away by what socialist cynics are starting to call New Old Labour? And if Lloyds, Barclays and the rest are precluded from offering decently priced services to more SMEs then the element of competition in the wider marketplace becomes inevitably skewed in favour of the smaller players. If they grow to a large market share presumably they will replace the current giants in the sights of Labour’s scattergun.
Breaking up monopolies is one thing – creating different ones that fill the void another entirely. Metro Bank was Britain’s first new High Street bank in around 150 years when it opened here in 2010 – ie completely new to the scene as opposed to becoming established via the acquisition of an existing entity.
A level playing field is the hackneyed sporting analogy applied to the creation of a fair, open and competitive marketplace but Labour’s policy would appear to involve bricking up one of the goalmouths.
Perhaps we will end up with a Tory-UKIP coalition instead and see introduced a version of the Eton Wall Game in the banking sector – a muddy, bloody free-for-all where every player’s head collides with the wall at some time or another.
Whatever the name of the game it is vital that SMEs emerge as the winner from any competitive mudlark. It might also be useful at some point along the way if someone reminded all our politicians that banks are businesses and major employers in their own right in the UK and therefore vital parts in what David Cameron is starting to call the jobs factory of Europe.
Fair for all rather than a free-for-all would seem to make for a sounder economic strategy than bank bashing for its own sake.
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