Parveen Bansal speaks to Dr Angus Porter about Abbey’s strategy to change the face of banking in the UK.
With a PhD in metallurgy and with marketing and executive management experience gained at Mars Confectionery and British Telecom, Dr Angus Porter is new to the financial services industry. In June last year he joined Abbey as customer propositions director.
One of three new executive board members hired since Mr Luqman Arnold was appointed group chief executive officer in October 2002, Dr Porter is not the only new kid on the block. Since taking over, Mr Arnold has overseen three major changes with the aim of steering the bank back to a position of strength. Previously, over a period of 10 years the bank went from being a relatively innovative retail bank, but still associated with being a former building society, to one that had lost its focus while trying to diversify its business.
Dr Porter explains: “In 1989 Abbey National was the first to de-mutualise. It was an innovative organisation. Then, you could say we lost our way a bit. In the summer of 2001 it soon became clear that there was a serious threat to the stability of the bank as it was highly exposed, owing to some risky investments in the wholesale business. It was also feeling the impact of over investment and the dotcom crash.”
Driving change
Mr Arnold’s first move was to unravel the wholesale business, where there were serious threats of failure. “Over the past year this has directly reduced the risk undertaking from £60bn to £10bn.”
Next, he set out a strategy for the business to move forward. Dr Porter says: “One of the benefits of Abbey was that there were no choices to make as to what was to be the core business: having got rid of wholesale banking, only retail was left.”
The third change was to recruit a whole new management team. “Five of the seven members of the executive team have been at Abbey for less than two years and three have no previous banking experience, like myself,” says Dr Porter.
Market share
So what is Abbey’s business strategy? “We have set out to be different – that is our challenge. We have set out to plot a goal for personal financial services. If you consider our competitors, they are much bigger than we are, in terms of market capital. Abbey is only the sixth largest, but if you drill deeper then it becomes evident that Abbey has a much stronger market position in many of its core businesses such as mortgages and savings,” he says.
Although Abbey’s market share has dropped over the past few years, Dr Porter notes that the change is not significant. “While most people are fairly fed up with their banks, with the gallant exception of First Direct (popular UK telephone bank, and an independent subsidiary of HSBC UK), most customers are still with the same banks as when they opened their first account.”
Dr Porter explains that actually moving accounts is harder and also people don’t believe that the service will be any different at any other bank.
Customer survey
In a recent consumer survey conducted for Abbey, not one person mentioned interest rates as a major concern. Most talked about banking being confusing; they complained about the confusing and sometimes threatening letters; and many felt that banks failed to recognise their customers.
Using the survey results to guide them, Abbey has set out to differentiate itself on three levels. “First, by trying to help customers get on top of their money, not between them and their money, like most banks do,” says Dr Porter. “In order to do this, a number of things are needed to bring it to life – it is all about democratising banking. Most people are not confident about managing their money.”
Mr Porter says that Abbey’s aspiration is to do for banking what the wine retailer Oddbins did for wine: “make it simple.” As he explains, by demystifying wine in their retail shops, using handwritten labels to describe it to their clients, Oddbins gave customers more confidence in buying a good wine. “It was simply the principle of giving people very practical advice.”
Accessible for all
Second, Abbey is looking to be cost-competitive – but not exclusively focused on price. Dr Porter points to the Swedish furniture giant IKEA as an example: “By making furniture available at a lower cost, they made design choice more accessible to people at a lower cost. Design choice is no longer only for the affluent.”
Similarly, Dr Porter finds the low-cost airlines are interesting because of the idea of stripping travel to the bare essentials – getting people from A to B. “People have never trusted the larger airlines that provide a different, better service to those seated up front.”
And last, but not least, Abbey is aiming to make banking fun. Again Dr Porter is ready with an icon. He names Jamie Oliver, world-famous young English chef, as somebody who symbolises what Abbey would like to do. “Jamie is enthusiastic about food and has a very hands-on, very practical approach to cooking.”
Enthusiastic approach
Put simply, Abbey wants to make personal finance services accessible, to simplify banking and to provide services at a low cost. And Abbey is approaching this with an enthusiasm that they hope will spread to their customers.
It is in this spirit that Abbey National was re-branded as Abbey. However, says Dr Porter, “The change in the logo was the first sign of Abbey changing, but not the most important one. As a service company it is important that we impress on the employees the major organisational cultural change that is the basis of our strategy.”
“We have about 25,000 employees, so it was critical to get them to believe in the change. We had to communicate with each and every one of them within 24 hours of the public announcement to tell them what we stand for and how we plan to achieve our goals. The message needs to be reinforced and built into everything we do.”
Indeed, the re-branding is highlighted on Abbey’s website as “part of a fundamental change within Abbey – the beginning of a journey. Our new name and logo are an important way of signalling the changes we are making. We dropped the ‘National’ part of our name because it sounded old-fashioned and institutional. ‘Abbey’ is shorter and friendlier. And, let’s face it, everyone calls us Abbey anyway. We’re absolutely serious about turning banking on its head, and our new name and look are just the most visible part of that process.”
Product consistency
The next step was to simplify the product ranges – mortgages, savings, and current accounts. “Now there is a lot more consistency on how products are branded, sold and presented,” says Dr Porter.
Before, Abbey had six different core current banking accounts targeted at different life stages; these have been consolidated into a single current account type. Dr Porter notes that whereas previously Abbey used to reward their under-11 year-old current account holders with 2% interest on credit, the reward for these customers’ loyalty was to withdraw the interest payment for credit when they turned 16. Now the 2.5% interest paid on credit is the same for everyone, regardless of age. “Our aim is to treat our customers fairly and reward customer loyalty.” To this effect Abbey is launching propositions that appeal to people in the longer term encouraging long-term, loyal relationships. For example, they have just launched an innovative deal on life mortgages.
Service standardisation
Abbey has also standardised other services. Cheque clearance, which used to vary from three to five days, is now standard at three days.
The mortgage and savings service is being improved by providing advisers with a clear process of determining the right product for customers. “Advisers now use decision trees to help them ask the right questions to establish the facts, so that the consumer is then clear and confident of the choice they make. Consistency and product simplification was hugely important,” stresses Dr Porter.
Another area where some major changes are being worked is in communication. “Letters from the bank don’t have to be mean, threatening and confusing. We have rewritten the many thousand computer-generated letters using everyday language to make clear and straight forward communication with their customers,” he says.
So far almost 2500 different letters (internal and external) have been changed. “We had to hire external copywriters to train our people to communicate like people again. The problem is not uncommon, any big company tends to talk in riddles.”
Staff training
Dr Porter notes that Abbey had under-invested in its systems, people and their training. Employee training is now top priority at Abbey. Three-quarters of the branch employees have been in their job for less than a year, says Dr Porter, noting that Abbey went through a deliberate process of changing staff. For example, all branch managers had to reapply for their job.
Like other banks in the UK, Abbey is also reinvesting in their branches to make them more service oriented and approachable, and improve the quality of the customer interaction.
“Like other banks have in the past discouraged people from using the branch, and now we want people to come back into the branches,” notes Dr Porter, “We will fundamentally endeavour to let the customer choose how they want to deal with the bank.”
Throughout the interview Dr Porter is confident and enthusiastic. Casually, he says: “It will take some time to get the huge engine running again. Our main challenge is that our whole strategy is based on treating our customers fairly and giving them a choice, and with this we have to compete against our competitors who have an instant gratification approach.”
If all employees have Dr Porter’s air of confidence and his ideas about service and customer satisfaction, then Abbey is well on its way towards getting that engine running again, even though the bank’s first quarter profits and margins were lower than last year.
