YOU could imagine this as one of the more difficult questions on “Who Wants To Be A Millionaire”. Chris Tarrant: “Where outside London did Morgan Stanley choose as the base for its UK credit cards business? Manchester, Edinburgh, Glasgow or Cumbernauld? “Take your time now, phone a friend …. No, it’s not Edinburgh, it’s Cumbernauld.”
The big guns of institutions such as Morgan Stanley are generally more at home in the concrete jungles of the City of London or downtown Manhattan. But three years ago Morgan Stanley Dean Witter, as it was then known, chose to base its nascent UK credit cards business in the much-maligned new town — still famous for its slogan “What’s it called? Cumbernauld!”.
The US giant, which dropped the Dean Witter part of its name in April, now regards what it has started here as a prototype for the future development of its business.
Nathan Hill, general manager of Morgan Stanley in Scotland, said that “persons from New York” — meaning Morgan Stanley’s top brass — had visited Cumbernauld and see it as a model for how the “bulge bracket” bank could trim its waistline and potentially restructure other parts of its business.
“They have been looking to this location being a model for future operations centres around Europe, co-existing in a facility where we have card services, institutional processing, private client processing and wealth management.”
Parts of the Morgan Stanley empire have been devastated by recent stock-market declines, which have cut brokerage fees, and sharply reduced revenues from mergers and acquisitions and helping companies issue new stock. So it clearly needs to cut costs and this cannot be achieved by taking the axe to merchant bankers bonuses alone.
The Cumbernauld site already employs people from across Morgan Stanley’s business, including about 450 people from card operations and 250 from investment administration, some of whom are German speakers servicing Morgan Stanley’s private clients business in Germany.
Hill says: “It’s all about realising economies of scale, being able to leverage support services and personnel so we don’t need to duplicate in many different locations.”
Having chosen the UK as the first overseas market for its Discover card in the late 1990s, Morgan Stanley looked at various possible locations for its operations centre. It cast its eye over Chester, Manchester, Dublin, Edinburgh and Glasgow before finally settling on Cumbernauld.
Hill — who has spent much of his working life with Sears Roebuck and Dean Witter in the US — said: “Scotland came up as very good, because of the space and incentives available and because of the people equation.
“We wanted people who were enthusiastic about work and who had excellent skills in this kind of industry. We wanted people who were motivated and who would appreciate what Morgan Stanley would mean in terms of career development. We hit on all cylinders when we came here.”
Explaining the choice of Cumbernauld over Glasgow or Edinburgh, Hill said: “Scottish Enterprise Lanarkshire, and Scotland as a whole, was looking to entice a financial services company.
“We looked at city centre locations in both Edinburgh and Glasgow but we were put off by a lot of things. We did not want to be in direct competition [for staff] with some of the more established financial services groups. We also took into account opportunities for expansion and the capital outlay we would need to put forward.”
Hill added that “They [Scottish Enterprise network and Scottish Executive] came up with a package that certainly interested us. We looked on it as a partnership.”
The Orchardton Woods site — sold last year by Scottish Enterprise to construction group Taylor Woodrow — fitted the bill perfectly. Scottish Enterprise Lanarkshire had already ploughed £1 million into roads and other infrastructure while grants were available on the basis of numbers of people employed.
The first 75,000 sq ft building on the site — which has a massive 90-metre wide window overlooking the Kilsyth Hills — already houses approximately 700 staff and has a total capacity of 1,000 working on different shifts. Morgan Stanley has the option to build a similar-sized building next door.
It may look like a call-centre to some but Hill is careful not to use the term. “This is an operations centre where people do much more than answer the phones.” The vast hall has a quiet hum of professionalism about it.
Hill says word-of-mouth reports are already attracting new recruits to the centre. “We had a jobs fair in January and approximately 400 people came to interview for jobs. It blew us away. They came because they recognised the name, because they had heard this was a great place to work and knew we had competitive benefits. Many just came to see it.”
When contemplating launching a credit card in the UK, Morgan Stanley at first thought it would use its Discover brand — which was introduced in the US in 1986 and now has 43.7 million customers worldwide. But there was a concern about the time it would take to persuade retailers to accept a fourth issuer over and above Visa, Mastercard and American Express.
“To have launched and built our own network would have taken forever,” said Hill. Morgan Stanley instead opted to use its own name in partnership with Mastercard. Hill said: “Mastercard gives us visibility, it gives us a quick start in the market and we can grow this in a matter of a couple of years.”
The card was launched in September 1999 with some similar features to the US Discover card, including cashback bonuses. But marketing, including the card issuers’ favoured channel of direct mail, is handled from London.
Hill believes that “unsurpassed customer service is a critical element in this market”. Hence the importance of customer services training and of motivating the staff in Cumbernauld. He is proud that phone calls are on average answered within 10-15 seconds, when the average for the industry is 35-40 seconds.
Colin Rutherford, assistant general manager, says the fact the majority of callers prefer to speak to a real human being, rather than a voice response system, speaks for itself. “Eighty per cent opt for speaking to a real person. The Scots accent is a real ice-breaker, in as much as they’ll say ‘I love your accent, whereabouts are you’,” he says. “Then you get into ‘what’s the weather like there?’ and that breaks down barriers.”
But in a fiercely-competitive market, service alone is not enough to build a leading position. In June, Morgan Stanley offered a 0% interest rate on borrowings transferred from rival cards. Hill says: “The competitive nature of this market said you had to be there. Our competition was doing that and we saw many of our balances going away.”
Now he hopes new customers will be persuaded to keep their cards once they have experienced the customer service available from Cumbernauld, even once their APR returns to 13.9% or 14.9%. “We want to impress on customers that Morgan Stanley is more than they thought it would be. If another offer comes about, maybe they’ll think twice about changing.”
Hill adds: “Growth has been on an upward trajectory ever since 1999. We have been about the fastest-growing card Mastercard has in the UK and have grown faster than most of the other US entrants to the UK [which include MBNA and Capital One]. We’ve had two very successful years.”
Industry sources believe Morgan Stanley currently has around 600,000 cards in circulation, which Hill claims is “ahead of target”. The next steps for Hill including assisting with the launch of the Morgan Stanley card in continental Europe, which will be a cultural challenge given that debit cards remain more popular than “revolving” credit cards there.
“It is likely we could do some of the work from here. A lot will depend on the country we go into and how many people we can pull from the local community who speak that language.”
“We will also consider joint ventures and partnerships. We’re always talking and on the look-out. We will also look into acquisitions that fit with the strategy. There is going to be some consolidation in this market, with a shakeout over the next year or so.” Morgan Stanley clearly does not anticipate being one of the shaken.
Catch up:
Morgan Stanley first chose to locate in Scotland in April 1999. Today, the investment bank employs 700 people at its Cumbernauld operations centre, where it offers 24-hour, seven day a week support for holders of Morgan Stanley credit cards. Last week the bank confirmed it would create an additional 400 operational support jobs for its securities business in Glasgow’s fledgling financial district. A spokesman said Morgan Stanley had signed a lease for 52,000 square feet in the Cerium building on the corner of Douglas and Waterloo Streets.
This article was published in the Sunday Herald on 16 December 2001