Retailer banking: it’s just not the same

We talk a lot about challenger banks.  These are the new banks that will create competition against the incumbents.  The names thrown around include Metro Bank, Virgin Money, Tesco Bank, Aldemore, Shawnbrook and more.  Although none of these have gained significant market share yet, the hope is they will against the Big Four: Barclays, HSBC, RBS/NatWest and Lloyds.  In fact, in this context, the biggest competitor is Santander who now have as many branches as HSBC in the UK.

Meanwhile, a name that isn’t thrown around so much is Harrods Bank.

Harrods, the retailer, has had its own retail bank for over 100 years, and is highlighted today in the Financial Times:

Word is that Harrods – owned by the Qatari sovereign wealth fund – is planning to expand in retail banking. Supermarkets and department stores are falling over themselves to take banking business from established high street lenders these days. Up to now, Harrods Bank has been in a different league, focusing (since 1893) on high-end private banking clients.

The new plan looks more mainstream. Harrods is set to launch a standard savings account next year, building on the mortgage product it launched in 2014. Chief executive Peter Ball joined Harrods Bank in January from the soon-to-be-floated Virgin Money to lead the retail charge. The Harrods venture is also counting on chairman Jeremy Soames, grandson of Winston Churchill, and CFO John Edgar, who once held the same role at Selfridges.

Well, interesting.  I’m not sure it will work though as the bank is very different to the retailer.

I always remember the story from the 1980s of the store hiring a very senior manager from the then Midland Bank, to run their bank branch.

The new man was a fusty old banking sort, and was very upset with the way the branch was run, especially as it was located next to the toy department.

In particular, he took objection to the idea that his rich clientele had to walk past a large teddy bear display to get into the branch, and so he complained to the store owner about the situation, asking for the bears to be moved.

The answer came back: “when your branch makes as much profit per square foot as those bears do, then we will move them. Until then, live with it.”