“It’s not worth it!”
“You cannot compete with banks,”
“Why would anyone want to set up a safe custody business?”
In trying to validate your safety deposit box business idea you must have got one of these statements and/or questions.
But think about it: In this digital age where most unicorns have come from companies offering digital solutions,
Why should you run a safety deposit service?
The truth is that the supply of safe deposit services is shrinking but that’s both good and bad news.
Good news because most banks are quitting the service, thereby breaking the entry barrier.
Bad news because it’s a high-cost business and turnover can take up to two years on average.
If helping people secure what’s valuable to them is your calling, then you won’t go wrong with a safe custody service.
And you can build one yourself or by hiring a consultant. Whichever way, this blog highlights the process it takes.
But first, what do the UK laws say about running a safe custody service?
UK Safe Deposit Box Regulations
The specific regulation that applies to operating a safe custody service lies within the Financial Conduct Authority (FCA).
However, to get your center fully ready for the market, you want to satisfy all relevant parties - so below are the following regulated areas and purposes to consider.
Insurance Purpose
Your safe deposit box must meet the Association of Insurance Surveyors (AiS) standards, without it, you may find it hard to shop around for insurance.
The major criteria here is that your safe meets the European EN 1143-1 standard, and the amount of insurance coverage available to such a box depends on the grade with which the box was certified.
Similar certification must also be done for vault doors, walls, and splicing if it’s part of your engineering requirements.
Operational Purpose
The anti-money laundering regulation of 2017 has made it mandatory for safe custody services to be registered with the Financial Conduct Authority (FCA),
and take steps to prevent the financing of terrorism.
This means each center must have access to conduct an AML check on customers and you must be registered and pay the annual fee.
The FCA has several fee blocks, and safe deposit services belong to “A.21”, which is for firms holding clients' money or assets, or both.
To know what resistance grade you should go for, research what competitors are doing Vs the popular insurance bracket to guide your decision or discuss with a consultant
Then follow these steps to get your center up and running.
Step 1: Conduct a Feasibility Study
Like any business, knowing what’s in demand will help you make informed decisions.
For safety deposit services, research should center on how much people spend on average, their spending culture, and the crime rate of the area.
Average earning:
The Office for National Statistics gives insights into how much people earn on average in a certain area.
Such information can give you a birds-eye view of how much they are willing to spend on securing their valuables.
Compare such information with the national average.
Spending culture:
What are these top earners spending on? Are they buying jewelry, houses, or traveling?
People would normally patronize safe deposit boxes if they’ve got something to protect like jewellery and important documents.
Crime rate:
People will most likely patronize safe deposit services if they feel their valuables are not safe at home.
These are some of the motivating factors for the demand for safe deposit boxes.
If these conditions are not present, you might want to devise other offers like a Will storage service.
After getting the necessary details, it’s time to make a plan.
Step 2: Make a Project Management Plan
Your plans should cover the necessary registrations.
The two important ones are HMRC and the FCA.
Depending on how big your team is, your project management plan should be split between each phase of project management:
The planning, execution, and performance.
Planning stage
Outline everything from building the vault to marketing and after a box is rented.
How will you get your business registered with the HMRC and the FCA?
How will you assess if your building has an engineering requirement for the vault or would you need to buy vault walls, splicing, and vault doors?
Plan on whether to supervise the engineering yourself or use a contractor.
How will you procure the boxes, and how to ensure they’re EN 1143-1 compliant?
Who is building the shelves?
Who is handling the IT infrastructure: registration, access, and security?
Would you need an insurance partner, and who are they?
These are common (non-exhaustive) areas you must consider when making your plans.
Execution Stage
How would you inspect the building and all the items we have identified in the planning stage?
Having a list of objectives, timeline and definition of done (completion criteria) would simplify this project management phase.
You would be testing each against the definition of done.
Even if you’re using a contractor, in this stage you will be working with them to test each item against their completion criteria.
Performance Stage
This is the stage where your engineering is done according to standard, and your insurance is sorted.
Is your IT infrastructure working accordingly?
Is the registration process seamless?
Are customers getting the help they need?
Is your marketing delivering as planned?
Step 3: Decide on Your Location
Before building the vault, deciding on the location (which should be done in the planning stage) is crucial.
Part of your consideration would be how customers can easily access the center, the traffic conditions, and the position of the vault in your building.
Let’s look at how these things affect your safety deposit service
Accessibility
If you choose a central location, it would make it easy for customers to access the center when they want.
Stonewall Vaults for example is located in Rugby but serves customers in neighbouring towns like Nuneaton, Northampton, and Birmingham.
These neighboring towns are all accessible via the M6, which is where the company is located.
Traffic conditions
Bad traffic situations at your safe deposit center can discourage customers from getting through.
Slow-moving traffic also can raise concerns about customers’ valuables getting exposed to theft and robbery.
Load Bearing
For convenience's sake, vaults are best cited in the basement. In this case, you spend less on reinforcement. costs.
Once these considerations are made, it’s time to build your vault
Step 4: Build the Vault
A vault would either be built with reinforced concrete or installed with prefabricated strong rooms (PSR).
If your building has special building considerations you would need reinforced concrete. Otherwise, you would need to install a PSR.
An engineer would normally use materials and procedures that meet the European EN 1143-1 resistance standard for vaults - the same standard applies to prefabricated strong rooms.
In the UK, such a test is carried out by the Loss Prevention Certification Board of BRE Group
Insurance providers consider your vault's grade when assigning you a cover, and how much coverage you get depends on the grade of your vault.
These providers look at resistance factors such as fire and burglary and rely on the Association of Insurance Surveyors (AiS) for such information.
Therefore to get your vault insured it must be tested by BRE and certified by AiS. The picture below shows how much cash you can insure your vault against based on your vault grade.
[Source: Associated Security]
Vault door
Whether you use a reinforced concrete wall or install a prefabricated strong room, you would need a vault door.
Like the strongroom, the vault door must also meet European standards for quality purposes and the AiS standard for insurance purposes.
So when procuring your vault door, you would need to take these into consideration.
Locking System
A chain, they say, is only as strong as its weakest unit.
The same can be said of a vault. The vault is only as strong as the door, its splicing, and the locks.
If procured from a standardized supplier, ensure they’re certified according to the UK market.
Access control systems
Common access control systems used by safety deposit centers include surveillance systems like CCTV, access systems like video doorbells for the main entrance, biometric readers, electronic access cards for the vault, and personal identification numbers (PINs) for entry into the strongroom.
Alarm and fire detection system
Fire detection and alarm systems regulation differ across the UK.
In England, the identified owners of a commercial building must take necessary steps to ensure the safety of employees and those within the building.
Part of this step is having fire-detecting equipment in place.
For a business that sells safety, a standardized fire detection system must be in place. So you would need fire and smoke detectors, a sprinkler, and extinguishers.
Your fire detection equipment must be interconnected - meaning if one goes off everyone goes off. For fast police or fire brigade response, ensure they’re connected to a panic alarm with priority access to local police.
Even the strongest vault run by multi-million-pound companies gets broken into. So you should fortify your building with the necessary security deterrent systems.
If you can afford it, complement it with manned guards.
Step 5: Fortify the Vault
Your vault should be fortified with the highest security standards.
There are two general categories you should consider: the physical safety and technical safety of your vault.
Physical safety
How strong is the vault splicing?
How strong is the vault door?
What EU grading scale is your vault, splicing, and doors?
The physical strength of your strong room will be checked against these factors, or refer to the guideline below to learn more.
Technical safety
What does it take to break in?
How tough are your access systems?
Is your surveillance system good enough?
You would also need to decide if you’ll use manned guards.
Insurance companies would factor in your technical safety when insuring your business or considering requests by your customers.
The more difficult it is to break in, the more protection you and your customers get.
Step 6: Spread the Word
Hurray!
Your vault is built and certified to operate.
But you’ll now be spending on security, keeping the vault nice and cool, and general operations.
How do you fill the boxes up to recover what you’ve spent?
Know who your customers are: Anyone can be a vault customer. From the mature group of 40 to 60 who have heirlooms and keepsakes to the boomers who have expensive PlayStations and Crypto Wallets and expensive papers holding their digital wealth - the need for a safety deposit box is not limited to expensive jewelry.
Reach out to your customers: most people hang out on social media these days. Running a Facebook campaign and a Google campaign will spread the word faster. You can use local radio and attend events to spread the word.
Keep your online channel relevant: you don't want people to visit a blank and boring site with a dearth of information. Understand different use cases of a safety deposit box and blog about them. Today’s buyers want to see how much you care before they decide to buy from you.
This is not an exhaustive list of things you can do to fill out your box. Always be innovative to find ways to reach out to your customers.
While keeping in mind that it can take up to 2 years to really sell out your box - it will do you good if you have a buffer budget you’re willing to invest in your marketing before you finally get what works.