Everything is online these days – talking, shopping, even banking. But would you trust a bank with no high street branches or customer service phone line – in fact, no way to talk to a real person at all? Fidor Bank is a German online-only bank launched in 2009, which entered the UK market last year. Despite having over 300,000 customers in Germany, it employs under 50 employees. Advice is given and received through an online ‘community’ of Fidor customers, sharing advice and helping each other with their problems. In true modern fashion, its interest rates are influenced by Facebook likes – the more it receives, the higher the rate will rise, up to a maximum of 0.5 percent AER. Chief executive Matthias Kroner says: “Our account is more like a marketplace than a closed box current account, it is a social community with a banking licence, it is a peer-to-peer economy. It’s a marketplace, shielded by a banking licence.” In January it launched a contactless debit card for its current account, but ut only the first three ATM withdrawals are free. After that, there is a £1 per withdrawal charge, whether the card is used in the UK or overseas. There is also a 1.5% foreign exchange fee on all non-sterling transactions, including cash machine withdrawals. The most recent online challenger bank to enter the UK market is Atom, whose chairman is the co-founder of Britain’s newest high-street bank Metro. It was granted a license less than a year ago to become the UK’s first digital-only lender, and its investors include star fund manager Neil Woodford and venture capitalist Jon Moulton, as well as Goldman Sachs asset manager Jim O’Neill. Unlike Fidor, Atom bank doesn’t even have online banking; everything is done through the mobile app, including mortgage applications and unsecured personal lending. “Mobile banking has overtaken branches, telephones and even internet transactions,” Mr Thomson said. “We have no branches, no legacy costs, no legacy IT systems or legacy balance sheet.” In fact, Thomson believes that customers are happier with less contact with their bank. “Customers who have less contact – face-to-face or voice-to-voice – with their banks are, surprise, surprise, most content,” he added. So far, its too early to tell for these banks just how well UK consumers will adapt to banking solely online; however, its clear that as with everything else, the internet is the future – and traditional banks will need to adapt faster in order to compete against the rise of start-up challengers.

Miranda Wadham on 28/04/2016

It started with just one store, its iconic red and blue sign standing out against the grey buildings of post-crisis London. Since then, it has multiplied; its name was whispered amongst friends, before hitting the headlines of main finance magazines. A growing ‘revolution’ against the traditional – and disgraced – UK banks: Metro Bank. The US-born Metro hit the streets of London for the first time in 2010 – the first new bank in the UK in 150 years, apparently – with the slogan ‘love your bank at last‘ emblazoned above the entrance. At the time this was, of course, a fairly tall order; 2010 was just two years after the financial crash that saw customers lining the streets of local towns to withdraw their savings from Northern Rock, a period that the British banking industry has yet to recover from. But Metro Bank ignored this, establishing itself proudly at a prime location in Holborn, ready to tackle the public’s mistrust with the kind of enthusiastic customer service that Americans are renowned for. It is now six years on, and Metro bank aren’t doing half bad. March saw their IPO on the London Stock Exchange raising £1.1 billion in private capital – and after an initial price plunge, shares are now steadily climbing back up. For founder Vernon Hill and his wife Shirley, things are looking even better – last Sunday, they entered the Sunday Times Rich List for the first time with a wealth of £400 million. Hill, an all-American businessman who made his fortune investing in Burger King, has a motto: “great brands grow by building fans.” And over the past six years, the fan-base has grown; the bank now has 717,000 customer accounts, up by 62,000 in the past three months alone. But the real question is – would I be one of them? At first sight, the bank has a very American feel – imagine, if you will, a cross between a bowling alley and an upmarket McDonalds and you’re about on the right page. However, I’m easily pleased and took a liking to the idea of having water bowls and treats for pets – I didn’t come in with a dog, but it was a refreshing change from the formal atmosphere of my current bank. (They also pay the re-homing fees for customers adopting pets from Battersea Cats and Dogs Home – I’m not entirely sure why, but I thought it was a nice touch.) I was offered a drink by surprisingly friendly staff, and shown where to wait – so far, so good. I’m no stranger to opening bank accounts – at university I opened as many as possible to take advantage of the cheap overdrafts and free railcards banks use to woo students – but this was the easiest so far. I needed only my passport – no proof of address – and the debit card was printed on the spot, rather than arriving in the post days later. However, the biggest selling point for me is the lack of transaction fee in Europe – as standard, Metro bank take no commission on payments made abroad and convert the currency at competitive Mastercard exchange rates – a rarity for UK banks. I chose my PIN and was signed up for online banking within minutes; I walked out half an hour later with a fully functioning bank account. The group now have over 40 branches across London and the South West, all of which are open seven days a week. Financially, they are doing well for a relatively new company – revenue rose 11 percent in the first quarter of 2016 and, whilst still not making a net profit, underlying losses were reduced by 7 percent to £7.9 million. If growth continues at this pace, management expects to break even this year and finally turn a profit in 2017 – not bad for a bank that is only six years old. Of course, we’re only a couple of hours into our new relationship and there are still many aspects to be tested – how will they fare when I lose my card? Or if my card is blocked aboard? Only time will tell, and for that reason I won’t be making plans to swap my main current account over any time soon; but based on today, Metro has potential. As a bank trying to be give a refreshing, customer-based experience, it certainly hit the spot.

Miranda Wadham on 27/04/2016

A major new survey of 100 of the most senior global executives in the retail industry has found that a third of UK retail CEOs are “not fit for purpose”. The ‘DNA of the Future Retail CEO’ report, published by the World Retail Congress and Green Park, has found that current leaders are ill-equipped to deal with the pace of change required in the industry, lagging behind with digital and data driven skills. Sir Ian Cheshire, chairman of Debenhams and former B&Q boss commented that, “it is clear from the research that in the eyes of our global panel, many incumbent chief executives simply don’t match up to their job description”. With a clear skills deficit in the digital area, the lack of online mastery drives the question of the willingness of today’s CEOs to adapt. As a major concern for the sector with both BHS and Austin Reed both recently announcing their administration, the problem is across the board as the report reveals that almost athird of chief executives at the UK’s retailers have gained their expertise through store operations. A perfect example of this is Steve Rowe, who only a few weeks ago was promoted to one of the most high profile roles in the country as chief executive of Marks & Spencer. Mr Rowe had begun his career as a shelf stacker at the company nearly 30 years ago; starting from the shop floor is nothing new, as internal hiring has always remained popular within the retail sector with a staggering 66% of current CEOs with no experience of working outside the retail sector. Whilst this was once praised as a sign of having a good understanding of the company’s day-to- day operations, the lack of fresh ideas is a concern for the evolution of retail. 37% of current CEOs interviewed said that the UK’s current pool of retail chief executives were not fit for purpose at a technical level, with 29% of the panel agreeing that they were not fit for purpose on personality traits either. “Out of 10, only about four retail CEOs would qualify if they had to re-apply for their jobs”, commented Bijou Kurien, former president of Lifestyle at Reliance Retail. Moving forward the report also identified 58 aspiring CEOs with a shift in experience and skills that will set the standards for the future. With store experience falling and digital experience increasing, the new generation will become change agents for their businesses. “There is a generational change taking place among retail CEOS. It’s become vital for them to have grown up with technology and appreciate what it can do”, comments Peter Williams, Chairman of boohoo.com. As we have clearly seen, the retail sector is changing at an unprecedented pace, so it will be interesting to see how the findings from this report are adopted by the industry. To read the full report visit FutureRetailCEO.com.