Is Metro Bank the future of high street banking?

When Metro Bank opened its flagship branch in Holborn in central London at the end of July, it became the first new bank to open on the UK high street in more than 100 years.

The PR wheels were oiled to perfection, with a mini Dixieland band and pastries and fruit handed out to passersby.

This sums up what Metro Bank's co-founders Vernon Hill and Anthony Thomson (who is also chairman) want the new bank to be: both fun and convenient. There will be customer toilets in every branch and dog biscuits on hand in case customers drop by with their pets.

The bank's biggest USP, however, is the fact it will open seven days a week from 8am to 8pm – although critics question how necessary it is for a branch to be open seven days a week in non-residential Holborn.

Metro Bank also plans to open three more branches this year in Earls Court (3 September), Fulham Broadway and Borehamwood in Hertfordshire, and more are due over the next two years – but again all within the M25.

Market competition 

However, this still means the bank is limited geographically which will prevent it from having the revolutionary impact it would like, said Andy Deeks, managing consultant of financial services consultancy Navigant Consulting.

"The main banks won't be overly worried: Metro Bank is only going to be in the M25 area and it offers a relatively limited online service."

For example, the website lists the savings and accounts on offer, but for more detailed information on rates you have to click on a PDF or phone the branch.

Deeks thinks that Tesco and Virgin – two brands rumoured to be planning to launch into the banking sector – will pose much more of a threat to existing banking competitors as they don't have to start from scratch as Metro Bank has.

Virgin Money has recently acquired Somerset–based building society Church House Trust. It is also believed to have made an (unsuccessful) bid for hundreds of RBS branches. But when asked about its plans to launch a high street branch, spokesperson Grant Bather simply said: "We remain committed to our organic growth plans."

Cautious customers

So while Tesco and Virgin have the potential to make a big impact on the industry, what effect will Metro Bank have? In a poll, 19% of readers said they wouldn't switch to the new bank, while a further 43% would wait and see how it fares first.

The reputational damage traditional banks have suffered has caused customers to be far more cautious, and although Metro Bank is fully FSA-backed and a member of the Financial Services Compensation Scheme, it will take time for it to establish itself and build up trust.

What's on offer?

But what about its products and offerings? Metro's instant access savings account pays a paltry 0.5% EAR, compared with 2.6% from current market leader West Bromwich Building Society, while its Young Saver account pays 1% against 6% from Halifax.

All credit card customers will pay a flat rate of 13%, which may be a good rate but looks less impressive alongside credit cards with 0% introductory periods.

"The fact that customers can have their credit card printed in-store adds to Metro Bank's overall convenience, but the lack of introductory offers means you can find better deals with the traditional banks," said Dilshad Issa, personal finance expert at

However, while the bank's opening has met with some questions over its long-term ability to grow and compete with the high street banks, Lloyds Banking Group's actions – handing out free shopping totes and balloons outside its Cheltenham & Gloucester branch, just opposite Metro Bank's opening celebrations – suggest banks are at least a little afraid of the new bank. 

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