FINANCE: BANKS AS BRANDS - Supermarkets, utility suppliers, car manufacturers - all have been piling into the financial services market In the battle for consumers, Harriet Green asks, do the high street banks have the marketing nous to outwit the newcome

The unlikeliest people want to manage our money these days. First the supermarkets, humble purveyors of washing-up liquid, tomatoes and dried lentils, offered us competitive savings accounts, credit cards and mortgages.

The unlikeliest people want to manage our money these days. First

the supermarkets, humble purveyors of washing-up liquid, tomatoes and

dried lentils, offered us competitive savings accounts, credit cards and


Then came Richard Branson’s Virgin Direct and British Gas’s


Now it’s the turn of the motor manufacturers, with Volkswagen just the

latest in a long line to consider an attack on the personal finance


Since when did banking become so sexy?

Selling financial products on the back of a trusted brand like

Sainsbury’s or Tesco has been one of the great marketing successes of

recent years.

In the past two years, the market has been shaken by the emergence of a

host of low-cost operators serviced by vast telephone call centres.

According to Mori Financial Services, a staggering fifth of all new

savings accounts opened in the past year were with supermarkets. The

result: the big four - Barclays, Lloyds, Midland (now HSBC) and NatWest

- burdened with the high cost of branch networks have been undercut time

and time again and, perhaps worse, wrong-footed.

’There are a lot of people interested in getting in at the moment

because there are a lot of rewards,’ explains Rupert Howell, managing

partner at HHCL & Partners, which launched First Direct, Midland’s

revolutionary direct banking division, in 1989 and in October last year

created the launch campaign for Prudential’s direct telephone bank, Egg.

’People are becoming more and more financially astute. There’s still

great potential for change and brand-shifting.’

As far as the advertising industry is concerned, such frantic activity

is welcome news. The new operations have opened up the market for

agencies simply by creating more accounts. As Howell says: ’When you are

creating a new brand like b2 or Egg, it’s got to be kept culturally

different, including the staffing structure. It’s a bit like Go (BA’s

new low-cost operation handled by HHCL) and BA. Of course, M&C Saatchi

(BA’s main agency) could have done the launch but the Go people wanted a

completely separate operation and completely separate suppliers.’

And agencies will be called upon for wide-ranging strategic advice.

DMB&B Financial’s planning director, George Miller, picks up the theme.

’In the past, banks had distribution power. The key to their success was

linked to the strength of the personal relationship with the branch

manager. When the high-street branch was king, it didn’t matter if it

was a Midland or a Barclays. Now people are driven not by the closest

bank but by the brand.’ Which means, of course, the big four will be

forced to sharpen their marketing act if they’re to compete in the

increasingly crowded market. Howell believes the fightback has already

started: ’The big players were not particularly nimble and were

wrong-footed. But they’re getting better.’

Meanwhile, many of the new entrants are from outside banking and


They have used technology, innovative products and aggressive marketing

to muscle in on the turf of the traditional banks and building


As well as the supermarkets, which have used their checkouts to woo the

public, life insurance giants - Prudential and Standard Life - and even

holiday operators have launched assaults on the sector.

More are still to come. Norwich Union, the life insurer, is stepping up

plans for a bank and even BA is rumoured to be entering the market.

So what’s the appeal? ’Many different kinds of businesses have realised

that their core business is less profitable than banking,’ Miller


’If you consider Sainsbury’s and Tesco’s wafer-thin margins on food, you

can see how they would consider using their access to customers and


What has given the new entrants the upper hand is the strengths of their

various brands. For years, the traditional high-street banks have abused

customers’ loyalty, offering poor service and poor deals. Their brand

value has consequently plummeted. In contrast, you’re unlikely to feel

the same distaste for your local Tesco or Sainsbury’s, two of the

strongest and most trusted brands in Britain. Branson, too, wields his

brand as his trump card. Virgin is synonymous with shaking up stuffy and

inefficient industries (Virgin Trains being an unfortunate exception).

He has consequently named his financial arm Virgin Direct.

But carmakers? It’s five years since General Motors launched its GM

loyalty card. Since then car manufacturers, which use their financing

arms as a natural launch pad, have expanded their offerings. Ford

Credit, the financial arm of the US motor giant, for example, recently

offered customers a branded insurance scheme, a neat way of enhancing

customer loyalty using its extensive database.

Volkswagen, too, is set to launch a series of savings accounts, credit

cards and banking products in Britain this year (CampaignLive, 4


The bank is to be modelled on the company’s huge German banking business

and comes four years after Volkswagen set up a British financial

services arm to offer business development loans to Volkswagen dealers

and hire-purchase deals to car buyers.

The Japanese car company, Daihatsu, is also considering a full range of

financial services in a bid to enhance its relationship with its

customers, as is BMW, which already owns the weighty BMW Bank in

Germany. Both, however, remain cautious about rushing into the financial

game at the first sniff of prey. Paul Williams, Daihatsu UK’s chief

executive, says: ’Every man and his dog is putting out a credit card at

the moment. We have to come at it another way. It’s about service,

relationships and understanding your customers.’

Richard Downs, customer marketing manager of BMW UK, agrees: ’We have

looked at launching a credit card in the past. It’s still there at the

back of our mind but it’s difficult to come up with a proposition that

is attractive to customers and different. The last thing we want to do

is a me-too. You’d need a reason for having it above an MBNA (a US

credit card) or a Barclaycard.’

So how are the traditional banks and financial organisations responding

to this alarming assault? At the moment they’re targeting youth with a

new range of shiny packages bearing untypical names, such as Barclays’

b2. The advertising is radically different too: Banks Hoggins O’Shea

/FCB, b2’s agency, shipped the cult actor, Richard E. Grant, to a

Caribbean island to shoot its stylish pounds 15 million launch campaign.

’Young people are a lot more selective in the way they bank,’ Sven

Olsen, managing director of Banks Hoggins, explains. ’They are more

brand promiscuous.

Banks are starting different brands to appeal to them.’ Howell outlines

similar motivations for the launch of Egg: ’Prudential has very powerful

financial services but the main brand isn’t particularly contemporary.

It’s big and conventional.’

Another way of putting it is that the traditional players are doing

their best to distance themselves from their has-been brands in a bid to

woo wised-up youth. ’What Barclays is hoping to do with b2,’ DMB&B’s

Miller says, ’is to set up its own competition so that at least if the

business goes out the door it might go back to them.’

Certainly, punters would have to scrutinise b2’s TV and print

advertising very carefully to link the brand to Barclays, although the

service’s management insists the pointers are there - the letter ’b’ and

the preponderance of the colour blue. ’It’s a new brand but it’s backed

by the security of an established one. In fact, in our focus groups, 15

per cent of customers immediately identified the new image with

Barclays,’ Graham Leigh, b2’s marketing director at the time of launch,


And let’s not get this out of proportion. The new banks don’t have it

all their own way. Many experts are sceptical about the new banks’

credentials, arguing that they have just bought market share from

traditional banks.

Behind the glossy brand names are alliances with existing players -

Safeway is linked to Abbey National, Tesco’s banking arm is run in a

joint venture with the life insurer, Scottish Widows, and Virgin Direct

has links with AMP, the Australian insurer.

So far, the new banks have turned most of their fire on savings


The main weapon has been instant access accounts offering top rates.

Prudential’s Egg outflanked rivals by offering a rate of 8 per cent on

an account with more than pounds 1 invested. Woolwich, in stark

contrast, offers just 7 per cent on its direct access account and

demands investors hold a balance of pounds 2,500. As a result, the new

banks have grabbed more than pounds 6 billion in deposits as savers have

switched out of the high-street banks in search for better deals.

According to Datamonitor, the market research company, Sainsbury’s alone

has raked in pounds 1.7 billion in 20 months. Standard Life Bank has

grown even faster, passing the pounds 1.7 billion mark last month - less

than a year after it was launched. But how long can such growth go


Jo Owen, a partner at Andersen Consulting specialising in financial

services, outlines the hurdles ahead. ’The challenge for them is to make

sustainable businesses. It’s potentially quite easy to buy market share

in the short term. In many ways the golden prize is to hold the current

account, since from that you can cross-sell a lot of products. However,

the track record of people moving from PEPs and unit trusts to current

accounts is not established.’

Others question the suitability of the newcomers’ brands to the world of

banking. Harry Macauslin, J. Walter Thompson’s deputy chairman, who

heads the main Barclays account at the agency, is doubtful: ’Banks have

to be careful about being sexy brands. They are about probity and

honesty. These are inherently not sexy things. If you were to paint a

portrait of a person who runs a bank, it would be a man in a pinstripe.

That’s fine; that’s what you want from a bank. Can banks become service

organisations with the warm cuddly feelings of a Branson or a

Sainsbury’s? You’ve got to be true to what you are.’

Laziness is still a useful ace in the hands of the old banks. As one

analyst puts it: ’The inertia factor in customers is still very high.

People may open an account with, say, Sainsbury’s Bank, but only an

incredibly small number of these will actually close their existing

current accounts. The vast majority of these new banks actually only

offer one product.’

Whatever the perspective, Andersen’s Owen forecasts a vibrant time over

the next decade: ’Everyone has predicted the end of the traditional bank

for a long time. In five or ten years’ time we will still be predicting

the death of the traditional bank. It’s a bit like the Roman Empire. It

took a long time declining but there was a lot of fun to be had along

the way.’

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