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Will new faces really bring power to the people?

More competition should be good for bank customers. Nathalie Bonney explores what’s on offer and it needs to build its reputation, which will take a long time,” says Andrew Hagger, spokesperson for comparison website moneynet.co.uk.

With new players on the high street, the world of banking is undeniably changing.These banks are promising to put their customers first, but are their assurances too good to be true? When it opened the doors to its flagship Holborn store in July 2010, Metro Bank was the first new bank to launch on the British high street for more than a century. Amid much fanfare and gimmicks such as lollipops for children, a pet-friendly policy and customer toilets, the bank had a serious message or ‘banking revolution’ to proclaim. Unlike existing banks, which all too often concentrate on enticing new customers in with competitive deals to the detriment of good customer service, Metro Bank wanted to make superior customer service its focus.

He is also dubious of the demand for longer-hour banking, given that customers increasingly bank online or by telephone: “I work near Bromley a couple of days a week and a branch recently opened there. Most of the time it looks quite empty.”

Incidentally, in spite of Metro Bank’s customer service mission statement, it has launched a 0% credit card on purchases, balance transfers and cash advances for 12 months

Celebrating the bank’s recent anniversary, co-founder and vice chairman Vernon Hill is full of enthusiasm: “Metro Bank promised a ‘banking revolution’ and has delivered a new model based on service and convenience, not product and price.The revolution has been embraced by customers everywhere and will in the years ahead continue to deliver and strengthen the Metro Bank promises to surprise and delight every customer.”

NEW KIDS ON THE BLOCK METRO BANK Plans to launch 16 more branches over the next 18 months

TESCO BANK Will add mortgages and current accounts to its range

Behind the marketing spiel, Metro Bank has successfully attracted 25,000 new customers and there are currently eight Metro Bank branches, all within the M25. A further 16 are planned to open within the next 18 months. Customers can access branches seven days a week, while more flexible opening hours, from 8am to 8pm, allow customers to get to their bank before and after work. However, there are no imminent plans to open branches outside of the M25, and as long as Metro Bank stays within such limited parameters, its influence will be curtailed.

CO-OPERATIVE BANK Opening bank branches in its sister supermarkets

VIRGIN MONEY Rumoured to be launching its own branches and over the summer also advertised its attractive travel money rates.This shows it can be competitive too. “You need to be competitive as well as offering good customer service. It doesn’t have to offer the best rates but it needs to be up there with other banks,” Hagger says.

Despite these attractive offers, Metro Bank is unlikely to turn its back on its customer service ethos and it’s more likely that traditional players will have to pull their socks up to make good service a similarly important priority.

NatWest’s customer charter, aiming to make it ‘Britain’s most helpful bank’, is an indication of this change of tack; likewise HSBC and Barclays are extending their branch opening hours and the latter is even offering customers tea and coffee.

The recent trend towards customers wanting more than just good rates was highlighted in Moneywise’s Customer Service Awards 2011.They showed that Santander, while well-known for its top rates, was still voted the worst provider due to its woeful customer service. Newer ventures, including supermarkets’ financial services, fared much better.

“Although Metro Bank launched in a blaze of glory, progress since has been very gradual. It’s going to take time to get going

Indeed, the burgeoning supermarket presence in the financial sector is another demonstration of consumer choice being

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given more prominence. However, unlike Metro Bank, which is concerned with attracting customers into its brick buildings, so far the supermarkets are concentrating on offering shoppers the chance to buy financial products online.

Sainsbury’s Finance consistently promotes best buy personal loan rates, currently offering a loan with a 6.3% typical APR on a £7,500 loan over five years.Tesco’s one-year fixed-rate bond pays 3.25%, putting it firmly in best buy territory. Asda has also got in on the act and its insurance has come in for particular attention, with its travel insurance including unlimited medical expenses as standard.

However, while it is fairly straightforward to offer easy-tounderstand products such as loans, bonds and ISAs, Hagger thinks supermarkets will struggle with more complicated products such as mortgages or current accounts that require more service. “I’m not sure we’ll see many in-store supermarket banks. It’s not just a matter of space, but also a question of how comfortable people would feel talking about their mortgage while someone is wheeling their trolley past.”

Tesco does plan to add mortgages to its range of financial products shortly, and will introduce current accounts in 2012.

The Co-operative Bank, which has been going for 150 years but is only now looking to move into its sister supermarket stores, is another indication that supermarkets view banking as a vital part of their retail arsenal. Because supermarkets know their shoppers’ habits, they can tailor promotions and special offers to suit them. So for example,Tesco Clubcard holders are privy to exclusive discounts on Tesco insurance products.

There is also the convenience factor, as Kirsty Ward, head of Asda’s financial services, explains: “If someone is going on holiday, they can buy their shorts and swimwear from George at Asda, their travel insurance from one of our counters, and even change their money at the in-store money exchange.”

It is also rumoured that Virgin Money will open its own branches. Speculation is rife that state-owned public bank Northern Rock is due to sell its branches, and Lloyds TSB also has 630 branches up for grabs; both would represent a potentially great buying opportunity for Sir Richard Branson. The financial arm of his business empire currently offers online services only, with financial products ranging from credit cards to ISAs, insurance and even a stakeholder pension.

Back in April this year, US investor Wilbur Ross invested £100 million of capital in Virgin Money to help with what the company calls the ‘organic’ growth of Virgin. When asked by Moneywise what further progress Virgin Money has made with regard to the possible acquisition of Northern Rock branches, the press office was unwilling to give any further details.

Although Virgin Money remains tightlipped about its plans, it’s clear the banking world is seeing plenty of new players coming to the fore. Let’s hope that a wider range of options for consumers will result in more power to influence bank behaviour too.

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