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Exclusive: Interview with First Direct

I'll post a couple of unique and exclusive items here in the next few weeks to celebrate First Direct's 21st Birthday, especially as the FSClub hosted their CEO to a dinner last night in this respect.

This follows our celebration of PayPal's 10th Birthday, so we're getting a reputation for celebrating the birthdays of disruptive banks.

Anyways, as a taster of this, here's an interview between Paul Say, Chief Marketing Officer at First Direct:

Paul Say

… and myself.

Chris Skinner: According to Paul Volker the last great innovation in banking was the ATM, but do you think being a bank without branches is innovative?

Paul Say: When we launched back in 1989, it was absolutely revolutionary. We suddenly launched onto a market that was used to going to a branch Monday to Friday, a branch that was not open at weekends, that only opened around certain hours – 9 to 5 if you were lucky – and you had to queue up for your money. If you needed to see your manager, you had to make an appointment. Suddenly we launched this telephone banking service that was available 24*7, 365. You could phone us on Christmas Day and New Year’s Day. That was absolutely revolutionary at the time. Today, it is a hygiene factor. A lot of the things that First Direct does or starting out doing are now hygiene factors for banks, but certainly when we started out it was absolutely revolutionary.

Chris Skinner: What is it that makes you different if it’s just a hygiene factor today?

Paul Say: I believe it’s the magical rapport we create with our customers, and that comes down to the people. That’s not just the person who deals with your basic banking calls, it’s also the person who deals with your digital problems if you have issues with internet or mobile banking. It’s fundamentally born out of respect for the customer, and putting the customer in control. It’s giving the customer banking on their terms, helping them to do what they need to do with their money when they need to do it. I fundamentally believe that’s the magic that we create. You can’t bottle it. That’s why it’s not been replicated. Over time, people have hired people from First Direct. We see some our people join other organisations, but fundamentally they cannot replicate it in the scale we have achieved here.

Chris Skinner: So is your innovation your culture?

Paul Say: Absolutely. We totally believe that people matter more. It’s interesting that in the digital age, people are more important now than they’ve ever been before. For example, I was talking with a colleague the other day about a business problem we are trying to solve. We went back to some papers we wrote five years ago. Back then, we said we are not a telephone bank or internet bank, but that we are a digital bank, with the people to prove it. Digital is so much wider now as a term, and so much more meaningful. It embraces telephony, it embraces mobility, it embraces the internet, but it also embraces all the new platforms that are emerging, such as the iPhone and Android. I totally agree with that cultural point therefore, and also believe in the human element of this as well. There is a movement towards authenticity and, in this technical age, that’s really tough to create and particularly on digital platforms. Creating that emotional chemistry that you get as the takeaway from the experience of our call centre for example. You cannot just create that magic. On reflection, that’s the single biggest revolution that we created in the banking industry. It’s also the single biggest puzzle we try and solve day in, day out.

Chris Skinner: How do you keep that culture to be different thought? For example, a lot of the banks measure call centre staff using metrics such as the number of calls they get through in a day with satisfactory closure within x minutes, and so on and so forth. How do you measure staff effectiveness?

Paul Say: Those environments where you are being asked to hit certain average handling times, queues on the boards and so on, we have a similar sort of philosophy but we try to make it more playful and fun for people to achieve those standards. That comes through doing odd things. For example, it is appraisal time at the moment, and so we have Wig-Wams dotted around the building because we want people to go for a huddle with their Big Chief, so to speak. We just try to lighten the mood and make it less pressurised. We also empower our people so that if a customer conversation is getting complicated on the phone, we say that this is OK. That’s because the customer is the centre of everything we are trying to achieve here. So we have those standards and measures, but we take an adult approach to those metrics and standards and also try to make it fun.

Chris Skinner: Do you think technology is the main driver of innovation?

Paul Say: No, it’s an enabler but not a driver. For example, we recently started to use social media type technologies – community forums and that sort of thing – which is by no means radical, but nevertheless a technology innovation. We knew that customers had great experiences with us, and that was because they had real conversations with us and those conversations are two way, and that is what we wanted to provide in our social media delivery. So the way we look at innovation is that there is a brand dynamic that is key as part of that innovation. The brand dynamic for First Direct is that we create a magical rapport with our customers through great conversations. Equally, there is a cultural dynamic. So the technology must be married with the brand and cultural dynamics if it is to be appropriate and effective. For example, we have a campaign at the moment called Talking Point (http://www.interactive.firstdirect.com/enthuse.html). Talking Point allows our customers to talk live and unedited about money and much more, including First Direct. The cultural dynamic driving that idea is that there is an element of mistrust generally in the banking world right now, and we wanted to take our brand dynamics of magical rapport of great conversations, and marry it with this cultural dynamic of mistrust. The result is that we created Talking Point to allow people to search for authentic experiences with a financial institution they can engage with. That is giving us a position in the marketplace of transparency and authenticity. So I’m a big believer that technology is an enabler of innovation, rather than the single driver, as there are other factors such as brand and cultural dynamics. I also believe this because you can sometimes try too hard to apply technology to your brands, and customers can reject you if you try too hard. That is why it took us at least eighteen months to find a place for the whole world of social media, and it is because we wanted it to feel natural. We were not going to force the technology and that experience on our customers if it didn’t make sense in the context of our brand and the experiences they were having with us. Does that make sense?

Chris Skinner: Yes, although it raises some questions too. For example, most banks apply technology for cost savings, but you seem to be looking for technology to enhance customer experiences.

Paul Say: That’s right. When we launched text message banking for example, we knew there was something in SMS messaging on phones which was about alerting customers and keeping them up-to-date. We actually positioned text message banking as being like a sixth sense when we launched it. The fact that we would send you a text alert when you’re about to go overdrawn, for example. Isn’t that great, to have a bank that alerts you before you go overdrawn?

Chris Skinner: But other banks would see that as bad, as they can make money out of customers being overdrawn. That’s why they won’t do social media or twittering or blogging, because it’s just marketing froth. It doesn’t make money.

Paul Say: It depends what you see as being of value. If value is pounds and pence, then does it really shift the dial on its own? No it wouldn’t. But if you see it in the context of contribution in terms of brand equity and the company credentials that you create around doing this sort of thing, then there’s inherent value in that. There’s also value in terms of word of mouth. People start talking about you when you do things like this on their terms, not the bank’s terms. On the back of this, business comes. A key thing here is that recommendation is as good as writing the business, as people do work on word of mouth, particularly in this age. So don’t look at this just in terms of bottom line contribution, look at it in terms of your brand credentials, customer service experience credentials, and look at it in terms of how customers will talk about you outside of the bank, in terms of word of mouth and recommendations. First Direct really benefit from that. We are the UK’s most recommended bank and have been for a very long time. We do benefit from that, because we know that when people join us, they are joining us because they’ve heard great things about us or somebody has personally recommended them.

Chris Skinner: That raises two things however. One is that if you are that successful, how come you are not Britain’s biggest bank; and secondly, if you have that expectation when customers join you, does it set the bar too high so that customers might be disappointed?

Paul Say: On the latter point, we have a satisfaction guarantee. The first thing is that when people join us, we give them £100 as a warm welcome to thank them for switching, as it’s a bit of a hassle to change your bank. But we also put our money where our mouth is, as we promise that if they don’t like the switch then we’ll move everything to wherever they want to go afterwards and give them another £100 to say sorry. We’re absolutely confident that we can offer a satisfaction guarantee when you join us, because we know we are that good and we are willing to put our money where our mouth is to prove it. That’s not arrogant. It’s just that we are confident in the experiences that our people are creating with customers.

Chris Skinner: So why aren’t you the biggest bank in Britain?

Paul Say: I can best answer that by saying that, when we started out, we really played to a part of the community who were completely disenfranchised by their banking experience. So therefore, we grew very quickly, because a lot of people decided “I’m going to switch, and it’s worth going through the pain of switching”. We continue to occupy that place in the marketplace, the switchers. In fact our target market is affluent, professional people, which is a very niche marketplace of the total switcher market. So we’re not growing by ten market share percentage points every year. What you find is that we deliver small organic growth, but when we bring people in we build the relationship and deepen the relationship with them. Therefore, we grow their product holdings, and that is our real focus. Rather than just acquiring new customers for one single product, we would rather acquire one customer for many products. The result is that we have a group of very profitable customers banking with us, who have extremely high levels of satisfaction and therefore recommendation of our services to their peers.

Chris Skinner: Finally Paul, back to technology and innovation. What do you think will be the key technologies for changing the customer experience in the future?

Paul Say: Well, we bought some iPads for the team here to trail, and when I took the iPad home my three-year old daughter picked it up. Watching her interaction with it made me realise that the whole principle of keyboards will be redundant soon. It certainly will be for my daughter as she’s already using touch screen; she’s using her fingers; she’s interacting directly with the screen, rather than through a keyboard. So creating touchscreen interfaces and experiences for our customers is going to be a really interesting area and a critical one to explore. The other area is any technologies that help to create a human engagement. The fact that you’re touching the screen is a human engagement, as it’s creating a chemistry between you and the experience of the brand that you might be interacting with via the device. That humanness, and bringing that humanity into the digital world, is going to be the next space.

Chris Skinner: What about video as a channel, as I know you’ve trialled that?

Paul Say: We’re pondering that right now at two levels. Absolutely, the idea of talking to a screen is going to be a place that we’re going to have to embrace and confront in the future, but there’s one thing about First Direct that is key here, and that is the mystique about that voice you hear on the end of the phone. As a brand, creating a visual representation of First Direct on the phone does raise the question: is that a good thing? In particular, as people create pictures and have a visualisation of the person on the telephone they are talking with, and where they are. That’s all part of the experience o f First Direct, and I wonder if we might erode the mystique and some of that magical rapport as technology moves forward.

Chris Skinner: I guess you’ll just have to give everyone 3D avatars to get over that one Paul. Meanwhile, thank you for your time today and I wish you well with your future innovations.

Paul Say: Thank you.

About Chris M Skinner

Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, the Finanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here...

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  • I’m amazed that Paul Say doesn’t really mention mobile, either discounting native ui’s or explaining why they the browser based versions like First Directs (not really an) ‘iPhone app’.
    I would have thought mobile banking was at the moment firmly on the marketing agenda – it is not a direct revenue stream yet. But it will be a loyalty thing very soon.

  • David Hodgkinson

    Very interesting that, thanks

  • Fritz Thomas Klein

    What a refreshing difference from other (unsuccessfully plagerating) approaches to create new direct banks: Customer (and staff) satisfaction first and then building success on satisfied customers instead of the consultant driven approach of efficiency irrespective of what the customer thinks.