So the banks still aren’t the favour of the month! Given that we’ve bailed out two of the biggest – so you’d think we should collectively be backing them with all the mindless fervour we’d give a long shot at the greyhound track, but just we can’t.
Yes, there’s some misguided blame directed towards bankers (mostly from shrewd politicians deflecting voters from their own inadequacies), but much of the blame still needs to be laid directly at the well healed feet of the bankers themselves. They don’t seem to understand what the man on the street is thinking and feeling – hence the bonus of £1 million for RBS chief executive, Stephen Hester.
Now he didn’t award himself the bonus, that was a remuneration committee of 4 people. 4 people thought that the public would find a £1 million bonus acceptable – oh, how wrong they were. Whether or not he deserved it is really by-the-by now, given the strength of public resentment. Yet another PR disaster for the banks!
Given the current state-of-play you might think any sane investor would avoid entering a marketplace full of such turmoil, but in many respects the impact has been quite the reverse. A number of new banks are opening their shiny new doors in an attempt to capitalise on people’s anger towards the major high street banks and breath fresh air into what seems to be highly toxic market.
2009 saw the launch of Aldermore, largely a re-branding of the private bank Ruffler which opened in the 1960’s. Aldermore doesn’t offer current accounts, but gives customers good savings rates to attract customers – who’s money they in turn lend to small businesses and mortgage borrowers who are denied credit from conventional lenders.
Then in 2010 Metro Bank open its doors (to humans and pets!). It was the first new bank to open on the High Street in more than 100 years, and promised to give customers a better banking experience – Including dog biscuits for man’s best friend! (strangely other banks haven’t started this yet).
The most recent bank to launch was Shawbrook towards the end of 2011. Although it’s backed by RBS it is completely independent, and is hoping to attract customers by focusing on a straightforward mix of saving and lending as confirmed by Owen Woodley, Shawbrook chief executive,“Given what’s happened in the marketplace in the last three years, there are very significant opportunities for what we would describe as a more traditional banking model” and it’s absolutely crystal clear that they are very keen to disassociate themselves from the old banking guard, reminding customers on their website that, “Shawbrook has no legacy lending from the financial crisis, so we’re free of toxic debt.”
So, what does the rest of 2012 have in store?
Well it’s started with a bang; Richard Branson opened his doors to a Virgin Money branch for the first time in January, after it bought the struggling Northern Rock back in November. The concept Virgin Money banks are aiming to provide customers with is straight forward banking that leads to a ‘fair profit’ for the company.
Obviously the Virgin brand gives them a massive advantage from a standing start, but rather fortuitously for Virgin Money, Bank of America put MBNA UK for sale in 2011 and Virgin (with a large number of credit card customers through MBNA) are believed to have first refusal on their portion of the credit book – which should give them a few million direct customers which they can try to cross-sell other Virgin Money products to immediately.
But what of Tesco Bank? Well, as of today Tesco confirmed that they will not be in a position to launch current accounts until next year. Yes, they will be offering their current insurance, credit cards and savings products, but they will not be able to sew it all together with a current account for a year.
So, rather than a whole host of new smaller banks opening their doors, this year looks more likely going to be focused on the new banks growing and establishing themselves as real challengers to the big four banks.
For example, Metro Bank which opened its first ‘store’ in 2010 has exceeded its own expectations for growth over the past 18 months, and has promised to introduce full online account management this year. This will help to make the bank available nationwide, rather than just in the towns where it currently has a ‘store’ – although what they can offer dogs online is yet to be confirmed!
The major British banks will not only be facing stiff competition from new banks to hit the High Street, as the credit unions have also had their powers increased allowing them to compete with the banks. Credit unions are not able to offer membership to people regardless of their place of work or where they live; offer services to businesses and organisations; and, pay interest on deposits.
These changes will mean that credit unions can now offer a real alternative to one of the big banks, and could prevent consumers falling into the trap of loan sharks. The removal of the common link restriction allows just about anyone to become a member, rather than having to have something in common with the other members such as employer or geographical area.
The chief executive of the Association of British Credit Unions, Mark Lyonette, said: “’These changes are a major breakthrough in the delivery of credit union services to communities around Britain. The new rules mean credit unions can now compete more effectively with banks and other lenders to provide fair and affordable financial services. Credit unions will be able to reach many more people, helping them to develop a savings habit, which can only be good for communities”.
All-in-all 2012 look destine to be a very interesting year for British Banking. Yes, we have traditionally been resistant to banking change , but with more new banks on the block than ever before there will surely be something to at least tempt us away from our current provider. Who knows – switching banks, might soon be as commonplace as switching credit cards!
|Written by :
Mark is the Marketing Director at CompareandSave.com, having previously worked at a number of media agencies on various financial brands.
He now splits his time between promoting CompareandSave and investigating new ways to help our readers save money.
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