Midland Bank II: rebooting old blockbusters is a sign of desperation

High-street banking needs to be re-invented, says Matthew Lynn. Stepping back into the 19th century isn’t going to help.


HSBC should ger radical, not retro

It is not entirely clear what the word Midland conjures up right now. A big motorway snarl-up. A lot of heavy metal. A bunch of football teams that always seem to be struggling to stay in the Premier League. One thing it does not really create is an impressionof high-tech dynamism. Even so, "Midland" seems to be front runner as HSBC looks to rebrand its UK business in preparation for what is likely to be a decision to move its headquarters back to the Far East. That was, after all, the name of the British chain that HSBC took control of in 1992 and will be familiar to many customers.

Looking to the past

HSBC isn't alone in reaching back into the past. The TSB logo is on the high street again, following its split from Lloyds. RBS is beefing up the old Williams & Glyn brand, with a view to divesting it. At this rate, it won't be long before the old National Provincial and Westminster banks are back (they merged to create NatWest in 1970). Heck, we may be welcoming back Smith's Bank, big before World War I, or the Nantwich and Cheshire, or Overend Gurney, which crashed in 1866 with debts of more than £1bn in today's money. Indeed, adopting that name would at least show a pleasing sense of irony for today's bankers.

Perhaps the bank bosses have taken a lesson from Hollywood, where rebooted franchises seem to have endless life in them Jurassic Park is just the latest in a series of revivals of old blockbusters. In one sense, it's possible to see what the marketing men are getting at. At least there is some kind of heritage associated with these brands.

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Yet the reboots are also a sign of desperation. In reality, high-street banking is a business model in serious trouble. It needs re-invention, and it needs to embrace technological change. Simply stepping back into the 19th century isn't going to help.

In its day, there was nothing wrong with the Midland brand. At the height of its influence it was the biggest bank in the world, lubricating the financial system for the manufacturing powerhouse that was Birmingham and the rest of the Black Country. That was the Shanghai of its day. But that era is long gone. The Midland brand does not mean much any more. The TSB brand didn't mean a great deal in the first place, and certainly doesn't these days. Neither do any of the other old brands that are likely to be dusted off and bought back to life.

Banks need fresh ideas

What this demonstrates instead is the terrible lack of imagination at the top of the UK's banking industry a lack of imagination that goes far beyond not being able to come up with a new brand. In reality, the traditional high-street model is in serious trouble. A network of expensive branches, even if a few of them are now being closed, has created cripplingly high overheads at a time when not many people need to visit a physical branch any more.

A series of mis-selling scandals has highlighted appalling levels of customer service, and a mind-set in which account holders mainly exist to be ripped off. Remote call centres have made getting hold of anyone at a bank virtually impossible. Even if you do their English probably won't be very good.

With the possible exception of travel agents and there are not many of them left on the high street either it is hard to think of any industry quite so ripe for technological disruption. Already the likes of Apple and Google are eyeing the juicy transactions profits of mainstream banks, while the new breed of peer-to-peer websites is stealing much of the lending business. Right now, it is only a wall of regulation that is keeping the industry afloat at all.

Time to reinvent banking

In their favour, the traditional high street banks still have lots of customers, and some remaining loyalty. They have networks that it will take new high-tech rivals a while to match (although not as long as the bankers would like). But if they are to survive, they need to re-invent themselves, and do it fast.

High-street branches should be closed down as quickly as possible, because they cost too much for the value they provide. Current accounts should be free if Google can provide maps and email for nothing, then a bank account should be simple. Banks should stop trying to cross-sell products unless they are genuinely world-beating, and look at ways of providing valuable advice instead.

And they should start looking at ways of sending money instantly and globally themselves otherwise they will leave that business to PayPal, and pretty soon people will be wondering whether they need a bank at all.

It can be done. The car industry is responding to the threat of driverless, computer-controlled electric cars by introducing new models itself the latest BMW parks itself after you've got out of it. The airline industry has lowered costs by simplifying ticketing. There is little sign of the banks doing anything similar. Nostalgia isn't going to save the banks any more than it saved any other companies. Yet the rebooted brand-names suggest that that is what they are going to rely on.

Matthew Lynn

Matthew Lynn is a columnist for Bloomberg, and writes weekly commentary syndicated in papers such as the Daily Telegraph, Die Welt, the Sydney Morning Herald, the South China Morning Post and the Miami Herald. He is also an associate editor of Spectator Business, and a regular contributor to The Spectator. Before that, he worked for the business section of the Sunday Times for ten years. 

He has written books on finance and financial topics, including Bust: Greece, The Euro and The Sovereign Debt Crisis and The Long Depression: The Slump of 2008 to 2031. Matthew is also the author of the Death Force series of military thrillers and the founder of Lume Books, an independent publisher.