Page 1: Introduction
Bank of Scotland has a long and distinguished history. Established by an Act of the Scottish Parliament in 1695, it is the UK’s oldest clearing bank with its headquarters firmly planted in Edinburgh. In the region of 22,000 staff are employed by the Bank of Scotland Group, with regional offices and departments supporting the activities of some 325 branch outlets, meeting the banking needs of all areas of the community.
Bank of Scotland also intends to have a long and distinguished future. It is one of Europe’s fastest growing banks. Its Board of Directors recognises that: banking is a global industry new technology is opening up new business opportunities world-wide domestic markets are increasingly exposed to international competition huge economies of scale are available to the industry banks that fail to grow put their future at risk profitable growth is the key to remaining independent.
For any business to grow, it must do one or more of the following:
- sell a higher value of existing products to existing customers
- develop new products and sell them to existing customers
- find new customers for all of its products, both established and new.
In the early 1990s, Bank of Scotland was looking to grow through strengthening its market position in England. In Scotland, it had an enviable reputation as a first class provider of banking services through the local branch network. In England, its presence was less obvious and its existence less well-known. The challenge for the bank was to find a way of expanding its business in England without incurring the massive overhead costs associated with creating a network of local branches.
Bank of Scotland identified a growth area: lending through a credit card facility. One major attraction was that growth in this market could be achieved without a massive capital outlay. Offering a credit card facility to people in England did not require a network of local branches. It utilised telephone and postal networks and centralised account-handling facilities that were already in place, and within which there was spare capacity. But how to attract customers?
Many people in England already had bank accounts, so there was no great pool of ‘unbanked’ on which to draw. Worse, people were generally slow and reluctant to change their bank, which was already offering its own credit card facility.
The solution arrived at was simple, yet also brilliant. Realising that it takes a greater loyalty to overcome a lesser one, Bank of Scotland asked itself: To what do people show the greatest loyalty? To what in their lives are many people happy to be tied? Out of this line of thinking came a new Bank of Scotland product: the affinity card.