April 25, 2013 11:52 pm

Customers come first in blueprint for RBS revamp

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Ross McEwan©Rosie Hallam

Ross McEwan sometimes gets lost in unfamiliar towns when trying to find the Royal Bank of Scotland branch he is visiting that day. But for the group’s new head of retail banking, who aims to visit at least five outlets a week, temporary bewilderment is only further evidence that its estate needs a revamp.

To that end Mr McEwan, a straight-talking Kiwi who joined RBS last August from Commonwealth Bank of Australia, plans a quiet but radical shake-up with a greater focus on locations with high footfall such as railway stations and shopping centres.

“I still see the branch network as a core plank of a great retail bank,” he says, while adding: “We will have a smaller footprint. We’ve been very fixed with bricks and mortar.”

For Mr McEwan reduced size does not mean a significant net loss in terms of branch numbers. Instead, he envisages smaller branches or kiosks – a type of self-service area where customers can even open accounts – in what he dubs “points of presence”.

“The two big malls there [Glasgow] – we weren’t there,” is his observation of a recent trip to Scotland.

It also means encouraging customers to carry out more businesses by themselves in branches, with about half of the £700m investment programme in the retail business he announced last month being earmarked to revamp tired-looking outlets and increase the use of technology in stores.

Excluding those branches to be divested under state-aid rules, RBS has about 1,700 branches of which only 400 have been refurbished in the last couple of years.

The UK retail business has grown in relative importance to the group in recent years as it scales back its investment banking activities. The government has made it clear that it wants RBS, which is 82 per cent taxpayer-owned, to focus on consumer lending in its domestic market.

Last month Mr McEwan presented to investors his vision of a more customer-friendly retail bank, with a politically on-message mantra about improving service and transparency.

“Focus on customers’ needs more than your own and they will do more business with you because they like you,” he added this week. “You have to look outside the UK to find really good retail banks unfortunately.”

His division has experienced a turbulent few months. A failed software update last June left it struggling to resolve a backlog of tens of millions of transactions. Another IT fault earlier this year pushed angry customers to again take to social media sites to express their frustration when they were unable to withdraw cash from ATMs or access their accounts overnight.

Like its competitors, RBS has also faced a hefty bill to compensate for mis-sold payment protection insurance, having set aside £2.2bn by the end of last year.

Mr McEwan was scathing of the state of the UK retail banking industry when he arrived at RBS last year and is unsurprised that Commonwealth countries have supplied the City with several recent recruits, notably the incoming governor of the Bank of England, Mark Carney, and his own predecessor at RBS, Brian Hartzer.

“The Canadian and Australian markets have come out of this [crisis] pretty well over the past few years,” he says.

Mr McEwan began his career in life insurance but has worked in retail banking for more than a decade, latterly as head of CBA’s retail division. In his sights now are beefing up RBS’ mobile banking services, used by more than 2m of its 15m personal current account holders.

“If you’re not there [online], you’re finished” he says. “In Australia you can do just about everything online you can do in branch – open products up, close them down, make international payments – except take money out.”

Bringing digital banking in the UK up to a similar level could prove critical for the second plank of Mr McEwan’s midterm plan for the business, to narrow the gap between RBS’ market share in new mortgage lending and savings with those it holds in personal current accounts.

To that end the bank will increase its number of mortgage advisers from about 350 to 450 in the coming months. The bank has a market share of about 8 per cent for mortgages, which Mr McEwan would like to grow by another percentage point in next couple of years. Its share of main bank accounts, fed by customer’s salaries, is 16 per cent.

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