M&S Bank- Viva La Evolution!

I recently ran a Financial Services Marketing workshop at the CIM Northern Conference, entitled “Viva La Evolution”, where I urged FS Marketers to evolve the way they gather and use knowledge to think about their customers, their market and themselves.

One of the tasks I set the delegates was to look at the risk of new market entrants from firms in highly trusted sectors and that had excellent customer service. Marks & Spencer was one of the companies I used in this scenario planning exercise to demonstrate the need to ‘look for competitive threats in unusual places’ and to ‘regularly review and update market response plans’.

So Friday’s news that Marks & Spencer is to launch M&S Bank in the summer came as no great surprise to me, with the intention to offer a current account from the autumn and mortgages ‘at a later date’. With over 3 million customers already using M&S Money, the near immediate cross-sales potential of the current account is massive. Add in the fact that M&S has 21 million customers and the business case writes itself.

What did surprise me was the rebrand from M&S Money to M&S Bank. The word ‘bank’ has developed negative connotations in some quarters and the move shows clear confidence that the strength of both the M&S brand and the M&S Bank proposition is materially different (and better) to that offered by ‘traditional’ banks. It certainly looks compelling, as customers will have access to branches that are ‘open twice as long as high street banks, seven days a week’, and will have 24 hour access to online banking.

This is all made possible thanks to a joint venture with HSBC, who describe this as “our most significant innovation in retail banking since we launched First Direct”. Nothing to be worried about there, then.

What do you think about M&S’ move? Do the high street banks have anything to worry about? Or will customer apathy and a renewed focus on increasing customer service levels be enough to hold onto their customer base?

Here’s the slide deck from my workshop last month.


4 thoughts on “M&S Bank- Viva La Evolution!

  1. Steve Dyer

    Hi Steve…thought provoking piece! I think the rebrand to M&S Bank was probably a necessity despite as you say the negative connations with the word ‘Bank’. Short-term negativity to one side for a moment, I would suggest that customers are happy to consider a range of what I would label ‘low risk’ financial products: credit cards, insurance products etc, etc from High Street Retailers such as M&S and Tesco… not forgetting that they are not without criticism: Store Cards and their extortionate interest charges. But when it comes to ‘high risk’ products such as current accounts & mortgages, this is, and think will always remain the domain of the Banks.

    What does surprise me though is the move itself. We all know that it costs less to generate more sales from existing customers than to find and convert new ones so I can see the merits of expanding the existing product offering, subject to their response to the above point. But eventually M&S will need to find new customers, which will ultimately mean creating such a compelling argument that will encourage new customers them to ‘switch’ from a well established, comparatively low-risk financial institution…the devil they know, to a newbie.

    Short-term confidence across the entire financial sector might be at an all-time low, with many people possibly thinking the safest place for their money is in the pants & sock draw. But is it so low that they are willing to arrange a mortgage or open a current account with the maker of said pants & socks?

    1. Steve Revill Post author

      Hi Steve,

      Thanks for taking the time to write such a considered comment.

      You make a great point around ‘low risk’ versus ‘high risk’ products and only time will tell how successful M&S will be in enticing customers to switch to those ‘core’ banking products like current accounts and mortgages. I do see a pattern emerging of trusted brands with a reputation for excellent customer service offering credible alternatives to ‘traditional’ banks, though.

      Cash stuffed into the sock and pants drawer made me smile. The safety/reassurance in the M&S Bank proposition comes from the fact that the banking infrastructure behind it is provided by HSBC (as a wholly owned subsidiary) and that customer deposits would be protected under the Financial Services Compensation Scheme.

      I don’t think we’ve seen the last new market entrant and ‘traditional’ banks need to redouble their customer retention efforts if they’re to hold onto the profitable segments of their existing book.

  2. Alistair Smith

    Your piece got me thinking. I had three observations:

    1. While no one would deny that trust in the banking sector is at an all time low, I would content that ‘faith’ that banks will deliver the services that they promise has held up: i.e. a consumer may not trust the bank to always act in the consumer’s best interests when selling a product, but the consumer continues to have ‘faith’ that if they use an ATM they will receive cash, if they receive a cheque the money will arrive in their account, etc. On this basis, M&S’s decision to use the word ‘bank’ is a rational one. It makes clear what services they intend to sell and gives them a foundation from which to try and differentiate on service, value, etc.

    2. Is a bank branded M&S, but with HSBC’s infrastructure behind it a ground-breaking move or simply a slightly more developed white label offering?

    3. Finally, and most fundamentally, can M&S find a way to ensure that its brand is not damaged by the introduction of the word ‘no’ to its customer interactions. It’s extremely rare for a retailer to say “No, Mr Revill you can’t have that bottle of wine”, but a bank has to decline mortgages and reject payments if the customer has insufficient funds. Given that research shows that ‘rejections’ are a factor in negative perceptions, it’s a real threat.

    To my mind, the most interesting market entrants are those we haven’t yet imagined, with business models which make existing players redundant.

    1. Steve Revill Post author

      Thanks for sharing your observations, Alistair.

      There’s no doubt, it’s a fascinating time for the sector. During the workshop I encouraged marketers to think outside of the ‘traditional’ competitors when considering who might entice their most profitable customers away- companies like Amazon, M&S, BMW (who have BMW Bank in Germany with 12bn Euros of customer deposits). I chose these firms as they have strong brands in trusted sectors but accept there are far more we haven’t even considered/don’t exist yet. I couldn’t agree more.

      Is this a ground-breaking move? Possibly not, but I’d be nervous about dismissing this as ‘simply a slightly more developed white label offering’- what’s on the label and what that label represents (via brand values- a set of promises, after all) counts. Is First Direct simply a white labelled HSBC?

      Your final point hits on some of the reasons why it reportedly took 5 years to convince the M&S Board of the move- lots of customer loyalty and band equity at stake. Turned me down for an overdraft? I’ll get my socks and pants elsewhere (maybe this is where high street banks can diversify?!).

      Thanks again for adding your perspective to the debate.


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