Enough Is Enough, Say Bank Customers as They Look for Ethical Alternatives; PERSONAL FINANCE Jeremy Gates Looks at the Nation's Money Issues and Reports on How More Consumers Appear to Be Taking Their Custom to 'Ethical Banks'
ALTHOUGH departing Barclays chief executive Bob Diamond agreed to limit his pay-off to pounds 2m this week, his dramatic fall seems to be proving a vital influence in getting people to switch bank accounts.
For years, consumer groups have urged long-suffering bank customers to take their business elsewhere - with limited effect.
Reports that Diamond awarded himself pounds 120m in pay and bonuses in seven years - while the share price was hardly impressive - might have finally done the trick.
Along the high street, new rivals to big banks are sure they can do a better job. They are boosted by the fact that switching banks is easier these days, so your new account should be fully operational within 20 to 30 days.
Since Christmas, website Move Your Money UK (www.moveyourmoney.org.uk) says that 80,000 savers a month have been leaving the banking giants.
Meanwhile, Nationwide, Britain's biggest building society, has launched a major "On Your Side" campaign, boldly presenting building societies as the perfect antidote to the big banks. Kevin Mountford, head of banking at comparison site MoneySupermarket.com, says: "Without doubt, recent problems in the banking sector have prompted some bank custom-ers to vote with their feet. We have seen a 25% uplift in the number of searches to the current account channel." Nationwide confirms an 85% increase week-on-week in the number of customers opening and transferring their main account online; including customers who switch accounts in branch, the society has seen an overall rise week-on-week of 26%.
John Crossley, head of current accounts at Nationwide, said: "The sharp increase in the number of customers switching accounts to us highlights our commitment to being the challenger brand to the big banks." Yorkshire, the second biggest building society with 3.3 million members (540,000 borrowers) and the main brand of Chelsea, Barnsley and Norwich & Peterborough (N&P) building societies, confirms a similar surge in current account business.
Yorkshire Building Society spokesperson Tanya Jackson says: "We're trying to quantify the impact that recent events (insurance mis-selling, IT problems, the Libor scandal) have had on our business and customer transaction levels; so far we've identified an increase in branch activity of about 10%.
"There also has been an increase in account openings, with strong demand for the Triple Access Saver, our traditional passbook account." Demand is strong for N&P's Gold Classic Current Account: the number of applications doubled in the past week, both online and in branches.
The Gold Classic account provides free overseas debit card transactions as standard, which could save almost pounds 12 in the cost of each withdrawal of pounds 250-worth of local currency in an overseas ATM compared to other providers.
Other benefits for N&P Gold Classic customers, who must pay in a minimum of pounds 500 per month, include free cover for cards and keys worth pounds 32 per year; free pounds 250 overdraft for six months (subject to status); a smooth switching guarantee with possible pounds 50 compensation if things go awry; and a single, competitive overdraft rate (17.9%) for both authorised and unauthorised balances.
Ewan Edwards, head of current accounts at N&P, said: "A high proportion of the society's new current account customers have switched from Barclays and NatWest and we believe this is clearly in reaction to the recent financial scandals and criticism of the big banks." At The Co-operative Bank, with 1.3 million current account holders, the number of switchers has jumped too; its internet bank, Smile, shows high customer satisfaction levels.
Robin Taylor, head of banking at The Co-operative Bank, said:: "We've seen a 61% increase in applications over the last three weeks and customers appear to be looking for alternatives in the banking industry.
"We've had two-and-a-half times more switchers from Barclays alone.
"Our customers say that the important things to them are trust, confidence in their bank, knowledge that they are banking with an ethical business and also good products and service."
Even the big supermarkets are looking to take advantage of the big banks' weaknesses: Asda, which serves 18 million customers a week, rebranded its personal finance division this week and introduced a credit card with a cashback scheme.
Mountford says: "The launch also follows hot on the heels of Marks & Spencer announcing an in-store banking service from this summer, backed by HSBC, indicating a wider move by the retail sector to enter the banking arena.
Michael Ossei, personal finance expert at uSwitch.com, says this is a key moment on the high street.
"The battle between the high street banks and supermarkets is going to hot up.
"Other providers such as Nationwide and Co-op are benefiting too, as people turn their backs on the 'old' in search of a more ethical and simple 'new'."
Many customers see "ethical banking" as the answer to current scandals.
Triodos Bank, a European bank with a UK base in Bristol, provides a range of ethical savings accounts.
It only lends depositors' money to businesses which have a positive impact on society and the environment - and says the number of account applications online soared 51% over the past week.
Charles Middleton, Triodos Bank UK managing director, says: "We are delighted to be welcoming more customers than ever to Triodos, as people think more consciously about money and its potential to do good or bad. We expect things to change at a more fundamental level too."
He adds: "If people moved savings away from banks who say very little about what happens to their money once invested, to banks which do the opposite and make a virtue of telling depositors how their savings are used, big UK banks would have to sit up and take notice.
"They would no longer have the financial support to be able to do things which created the mess they are now in.
"At Triodos Bank, we take pride in doing things differently. A fair profit, a strong capital base and a stable funding base from savers' deposits are key parts of our approach.
"We have no need to engage in the wholesale markets and never lend out more than we have on deposit. Nor do we use derivatives and other complex financial instruments, which can put savers' money at risk.
"At the core of our banking, we are directly connected to the real economy, only financing sustainable businesses delivering clear social, environmental and cultural benefits with lasting positive impact."
The Triodos Bank success story has been repeated across the eurozone; after Spain's banks bailout, its Spanish branch doubled its tally of new customers in a single month.
In two decades, Triodos Bank has grown assets under management to [ETH]6.8bn, with 22,000 loans offered to sustainable businesses such as Hugh Fearnley-Whittingstall's River Cottage, Ecotricity, Cafedirect, and Glastonbury's Worthy Farm.
While Triodos doesn't yet offer a current account - it would be too expensive to provide free banking in many cases - it has more than 350,000 customers in the UK, Netherlands, Spain, Belgium and Germany. Deposits are covered by European protection, to a limit of [ETH]100,000. Middleton says: "At last, people can see credible alternatives to the established financial system. They can get a social and environmental return on their money - and a decent financial return."
Mountford adds: "Only move banks for the right reasons. If you are unhappy, jumping ship is not always the answer.
"It may be better to make the most of products you already have - by being savvier and not paying over the odds in fees and charges.
"Consumers should review an account regularly to make sure it suits their financial situation.
"Ultimately, people need different things from current accounts; those who mainly stay in credit tend usually to find that cash incentives are the best way to maximise returns, while others should study overdraft charging structures.
"Those thinking of ditching a bank account altogether after recent events should think again.
"Having a bank account is essential to gain various benefits.
"Many people struggle to get paid without a bank account, as most companies use bank transfers rather than cheque or cash in hand."
* Reports that Barclays boss Bob Diamond paid himself pounds 120m in pay and bonuses in seven years may have encouraged customers to move to 'ethical banking'…
Questia, a part of Gale, Cengage Learning. www.questia.com
Publication information: Article title: Enough Is Enough, Say Bank Customers as They Look for Ethical Alternatives; PERSONAL FINANCE Jeremy Gates Looks at the Nation's Money Issues and Reports on How More Consumers Appear to Be Taking Their Custom to 'Ethical Banks'. Contributors: Not available. Newspaper title: Western Mail (Cardiff, Wales). Publication date: July 14, 2012. Page number: 28. © 2009 MGN Ltd. COPYRIGHT 2012 Gale Group.
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