Serial entrepreneur Anthony Thomson has picked North East England for his second bank launch – but not out of any perceived need to redeem the region’s reputation as a banking centre post-Northern Rock. On the contrary…
“As a seven, eight, nine-year-old I had a passbook for Northern Rock,” he recalls.
“I’d go to Gosforth High Street bank and pay in or take out. I’d a great affinity for it as a building society.
“Even when it converted to a plc it was held up for many years as the future of banking. Then it had some problems. But I don’t think the North East’s reputation in the sector has suffered. This region has been a centre of entrepreneurship and innovation in so many things. Hopefully we’re next in that line.”
“Some problems” of course brought near total expiry. The Government had to mount a taxpayers’ rescue. Uncertainty eased only when Virgin Money bought the Rock’s “good side” in 2012 – all to float soon on the stock exchange, probably. The toxic debts, mashed with Bradford & Bingley’s, rest with West Yorkshire based UK Asset Resolution, which has repaid £10bn-plus of Treasury loans, but which may not pay the majority for another decade yet.
Anthony’s embryonic digital-only Atom Bank, like Virgin Money, now reflects wishes of the Government, the Bank of England and many bank users to see wider choice of banks in wake of the industry’s scandal going far beyond Northern Rock and onto a five-year mess-up of the national economy.
Atom Bank (A-tom, Anthony Thomson) is one of numerous “challenger” banks opening – but “much more about high tech business and personal relationships”, says Anthony. “It’ll be the UK’s first totally digital and branchless service. From next year, it will deal nationwide, and in the North additionally bring in business banking with focus on SMEs’ needs that will spread then to the rest of the country.”
North East venture capitalist and philanthropist Jeremy Middleton, confident of Atom’s potential value to the region, is investing a six figure sum in the bank. For the North East there could be 400 jobs. During this interview, Anthony said several sites were being considered. He seemed very impressed though by new-look Gateshead where, at the Baltic, he’d just made his second presentation in three years via the Entrepreneurs’ Forum to enthusiastic audiences.
Can a national bank run successfully in a region? One recalls Darlington Quakers’ contribution to the growth of Barclays back in 1896 as Thomson replies: “Banking started regionally. Only through mergers did they become national banks. I’m not sure whether a bank like Atom could have been created three years ago. But technology changes make it feasible, and feasible from the North East.”
He cites his fortnight on America’s West Coast from which he’d just returned, jet lagged except in presentation power. “I was in touch with our team daily from there by Skype, email and phone,” he says. “Geography’s limitations don’t apply today – even compared with five years ago.”
His penchant for exploiting technology – though no “techie” himself – inspires his starting of a second bank so soon after his first successful venture, Metro Bank, which he chaired for three years before leaving in 2012. In four years it has created 26 “stores” (branches) and has 1,000-plus employees handling 350,000 accounts. He meanwhile has been visiting professor to the business school of London Metropolitan University.
Anthony reckons digital’s rising as telephone banking and fixed desktop internet usage falls. “Growth in mobile phones and tablets is explosive,” he says. “Within five years 60% of all banking could be on mobile devices. That drove my idea. Mobile digital can be a lower cost provider.”
Handier, too. Flying to Newcastle from Bristol straight from his US visit, he’d checked in at the airport by mobile - even bought coffee on it. “I hate on online banking the incredible number of passwords you have to remember,” he says.
He suspects many do. Security enters it too, he stresses. So it looks as if biometrics, already practiced in Australasian banks, may be brought in early on. “If a password is one time safe, voice is trebly secure, the iris five times more. With biometrics you won’t even have to remember your own name. You’ll just need to have with you, ideally, your face, your eyes, your fingerprint or your voice.”
But why from the North East, not perhaps Cambridge or Manchester? Says Anthony: “Great value products and great customer experience are predicated on very low cost operating, and it’s much more cost efficient to base head office here.
“We have to get the best people, and will go anywhere for that. But there are some great human resources here - experienced for our purposes. And some great providers of digital technology service. The North East needs new businesses. Trials and tribulations of some other banks will be to our advantage.”
Joining Virgin Money and Tesco’s national banking centre in the North East (the latter now with 6m customers) should energise further the region’s previously under-represented banking services sector. However, other “challenger” banks are springing up elsewhere over the next two years, hoping like Atom and Metro to slacken a Big Five grip.
But it’s the existing giants Anthony is scathing towards. “Almost every one has terrible IT,” he says. “One big bank’s using more than 20 different banking platforms. Many build fantastic front ends onto awful back ends - like putting lipstick on a pig. It’s still a pig. Our great front end plugging into a state-of-the-art back end gives great advantage.”
He rolls his eyes at suggestions there’s no money now in high street banking. “None in it for them because their cost bases are so high. Apparently over 80% of the banks’ IT budgets, running into billions of pounds collectively, are spent maintaining old fashioned systems.”
Some may try to pre-empt Atom, copying beforehand. He suspects 300 RBS people are already thus occupied. But he’s a chairman confident Atom will prevail in its niche through technical superiority, and through his key appointments being experts personally known or introduced to him.
His co-founder and chief executive is Mark Mullen, chief executive of First Direct, which claims the UK’s highest customer satisfaction ranking in the sector. Also signed in is Ed Twiddy, “atomised” from the North East LEP and HM Treasury to be chief operating officer, leading innovation also.
Also from the North East LEP, the Department for Work and Pensions and the Cabinet Office is Sophie Haagensen. She led formation of Big Society Capital, the world’s first social investment bank, and oversaw the £150m loan book of the Futurebuilders third-sector support fund.
Chief financial officer is David McCarthy, chartered accountant, corporate treasurer and with 23 years in financial management to his credit (Touche Ross, Home & Savings Bank, Britannia Building Society and Bank of Ireland). Craig Iley, the Teessider already one of the region’s most astute banking bosses, is joining from Santander as managing director of business banking. Stewart Bromley will be HR director.
What’s been different about setting up Atom and setting up Metro? “When planning Metro from 2007, getting authorised was difficult and expensive. There hadn’t been a new authorised bank for over 100 years. But with the Bank of England, the Treasury and the Government all wanting more consumer choice, more competition, more credit for smaller businesses, they’re encouraging in a way they weren’t before.”
Significantly, Anthony is expected to become a non-executive director of US group Fiserv’s banking software venture, aimed at cutting the time and cost of gaining a UK banking licence.
Atom believes, contrary to some claims, many older people are internet users, while many young people aren’t. So spanning the age range is feasible. “We’re aiming at people comfortable in our environment,” he says.
Hats in the ring
Other challenger banks in the running include up to eight valued at up to £10bn, which may float on the stock market. These include One Savings Bank, formed from a bale-out of Kent Reliance Building Society by the US equity firm JC Flowers.
It recently made its market debut. It has been seeking to profit from buying risky loan portfolios shed by other banks, and by stepping into areas of the market others are avoiding, such as self-certified mortgages.
TSB is returning to the high street after 18 years within Lloyds, and restoring traditional services, while Aldermore Bank, set up four years ago and owned by several hedge funds, could go public this year. Other flotations might include Santander’s UK operation, Shawbrook and Williams & Glyn. RBS had to sell the latter by EC instruction last year over its acceptance of state aid. Selling it to Santander became too complicated and it may not float now until next year.
Question marks also hang over the Co-operative Bank, rescued last year by American hedge funds. Meanwhile, National Australia Bank is thought willing to sell the Clydesdale and Yorkshire Banks. Other challenger banks entering the fray include Paragon Bank, Tungsten, and Weatherbys, a financial backbone of the horseracing industry, now diversifying.
Some City analysts doubt all will survive long term in present form. They are attracting savings from disillusioned investors but are thought to be struggling to find borrowers.
Then too there’s Virgin Money, with 4m-plus customers, possibly to be valued at £2bn.
Branson’s Virgin Group holds a 47% stake, Wilbur Ross, an American billionaire, 42% and the balance with the Abu Dhabi government, 2,700 employees and management.
Where UK plcs go wrong
A rapt audience of North East entrepreneurs and guests heard Anthony explain his motivation.
“I believe we start businesses because we’ve an idea for a better product, a service or a better experience for our customers,” he said. “Profit should be a by-product of doing that well, not the reason for the business.
“If you really believe, focus, and discover what differentiates it, then build a culture underpinning it, and do that relentlessly, you’ll build an incredibly successful business. One of UK plcs’ great malaises is that they think they’re just there to make money. They’ve forgotten the customer.”
Born in Corbridge, Anthony attended Ravenswood School, Heaton, and Gosforth Grammar School, leaving at 17 with cherished memories of rugby rather than academia. He tried shop work and other jobs. Then, satisfaction: he sold advertising for the Evening Chronicle - “I fell into marketing and left only to drive a business.”
Named by the Evening Standard as one of the 60 most influential individuals working in the City, Anthony chairs the National Skills Academy for Financial Services, and the Financial Services Forum he founded in 1998. He also founded in 1987 City Financial Marketing, selling it as Europe’s largest communications group in financial services to Publicis in 1997. After 27 years’ experience in financial services, he launched Metro.
His co-founder and vice-chairman was Vernon W Hill II, an American serial bank creator. To find staff sharing Anthony’s vision, Metro interviewed 3,500 applicants for the first 60 jobs. Now nine out of 10 customers say they’re satisfied or very satisfied with Metro. Eight out of 10 would recommend to a friend. Half the new accounts come through recommendation.
But why a need for Metro, he was asked? “People don’t like banks. Don’t trust them. Banks are mired in legacy real estate they can’t get out of. Branches of NatWest in three years have declined 30%. My marketing training told me what matters to customers of high street banks is price. Research also told me bank customers want service, convenience, transparency and consistency. They hate when new customers get a better deal than they do.”
Though no longer Metro chairman he remains a keen supporter, gleefully showing his audience a photograph taken one 8.40am of a Metro store neighbouring a NatWest branch. People were thronging Metro, not the competition.
“They hadn’t opened,” he explained. “People must be able to do things when and where they want – like banking en route to work or on their way home, or on Saturdays and Sundays.” Metro stores open seven days a week, 8am to 8pm, 361 days a year.
“Give customers a better experience, whether it’s a seven day opening or toilets in every store. They’ll give you more of their business,” says the voice of experience.
Why a second bank, though? “Because Metro was set up with a specific strategy. I can hardly believe how fast the market has moved with the explosive growth in mobiles. My decision is due to a combination of things, including opportunity in a market of a particular type.”
Thomson plans to work in Newcastle two days a week. An able guitarist, he’ll continue to live within earshot of Glastonbury Festival (Mrs Thomson’s choice, actually) but it’s only 50 minutes between the nearest airport, Bristol, and Newcastle. There’s a familial pull too. His father and five brothers live in the North East. “And BQ’s breakfast website helps keep me in touch,” he adds.
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