The brutal part of the banking revolution hits NatWest

`Customers in future are to be considered simply as entries in a "database", to be sold products "direct"'

MY EMOTIONS on learning of Bank of Scotland's audacious bid for National Westminster Bank, more than twice its size, have ranged from delight through cynicism to despair, ending up with hope. Delight, in the sense that a connoisseur experiences it, because, if you follow take- over battles, this one is already worthy of an entry in the text books. It would feature in the chapter headed "Perverse Outcomes". This is what happened.

After 10 years of strategic errors, with a new chairman in office, NatWest tries to pull off the Big Deal. Earlier this month it announced that it was to acquire the major life-assurance and pensions company, Legal & General. But instead of securing the bank's future as a major force in the financial services market, the deal exposed its weaknesses. Professional investors believed that NatWest was over-paying, and immediately sold some of their holdings and depressed the bank's share price.

Many observers, too - including, no doubt, Bank of Scotland - thought the logic of the merger was faulty in the sense that it was far from certain that NatWest customers would cheerfully stock up with Legal & General life policies and pension plans just because they had become, so to speak, in-house products. And the final flaw was the announcement that the admired chief executive of Legal & General would be put in charge of NatWest's private customer business, thereby admitting that its own managers had lost the plot.

The Scottish bank sees its opportunity and pounces. As a result, NatWest, rather than proudly taking over a famous insurer, is now, just a few weeks later, fighting to prevent its extinction as an independent bank. The fate of its old rival, the Midland Bank, stands as an awful warning. The Midland Bank name has virtually disappeared from high streets; branches carry merely the dreary initials of its Hong Kong owners, HSBC. In 1945 Midland was the biggest bank in the world.

Cynicism because Bank of Scotland, judging by its public pronouncements, seems to be basing its plans on the dubious assumption that it can quickly change NatWest's internal ethos or style. In fact, the character of institutions is hard to alter. It is formed comparatively early, and generally persists through generations like an old religion. To take an example from a different area, attempts to reform the House of Commons, which are mounted by every new government, have foundered for this very reason.

High-street banks are venerable (they first assumed their current form in the middle of the 19th century), they are bureaucratic by nature and their managers tend to have spent their entire careers in their service. This means that they are resistant to different ways of doing things. NatWest's highly intelligent chief executive, Derek Wanless, could give eloquent testimony of this if he was disposed to write his memoirs - as he may shortly have the time to do.

His bank, for instance, with terrible consistency over the past 20 years has made disastrous choices of chairman. Their shared characteristics have been ignorance of banking and no experience of management. They have come from the bar or from politics. This is part of the ethos. The general managers run the bank; the board is there to perform a decorative role. Twenty Scottish troubleshooters, or however many Bank of Scotland can spare, won't quickly be able to change the character of which this is a part, a style at once conservative and, when rattled, erratic.

Despair comes from contemplating the hard selling of financial products which awaits NatWest's customers. Bank of Scotland says that NatWest's branches should be diverted from processing towards selling; NatWest should become a slimmed down retail operation using a handful of high-technology call centres to sell more products to customers who will continue to bank at branches. In high-tech jargon, Bank of Scotland announces that "the database of branch clients will be sold products direct in a more sophisticated way than ever before".

If this means what I think it does, it makes me shiver. It appears customers are no longer thought of as individuals possessing different circumstances and aspirations with whom a bank has a life long relationship; in future they are to be considered simply as entries in a "database". They are to be sold products "direct", which carries the risk that they cannot readily compare what they are being offered with rival products. And I fear that "more sophisticated" may mean that the packaging of financial products will be more artfully designed than hitherto.

We have experienced high pressure selling of financial products in this country. It has recently given us inappropriate pension arrangements and ill-conceived house loans on a large scale. Moreover, as one firm of financial advisers comments: "neither bank offers particularly good products and I can't remember when we last recommended them." It is a question of attitude. Outside the financial services sector, many companies believe that if you put customers first, shareholders will automatically do well. Priorities in the financial services market, on the other hand, often seem to be the reverse: commissions for sales staff and dividends for shareholders come top of the list.

Why, then, am I also hopeful? Because technological developments are revolutionising high-street banking. First cash cards and credit cards, then telephone banking and now the Internet; all these not only make it easier to carry out financial transactions, they have also allowed the arrival of strong new entrants into the sector, such as the big supermarket groups. At the same time, de-regulation has increased competition from building societies which have turned themselves into banks. And because an unsuccessful bank like NatWest still earns a higher return on capital than an efficient retailer like Tesco, this trend will continue.

In other words, high-street banking is in flux. The fact that a small Scottish bank can bid for a substantial English business is proof of that. The revolution has some way to go. Now it is passing through its brutal stage - branch closures, disappearance of old names, redundancies, high- pressure selling, customers as sales targets. Eventually, though, the banks should be able to harness the superior skills of other high-street retailers and, using new technology creatively, build a new and better relationship with their customers. Bank of Scotland's audacious plans are part of the process.

Arts and Entertainment

Arts and Entertainment
Fearne Cotton is leaving Radio 1 after a decade

Arts and Entertainment
The light stuff: Britt Robertson and George Clooney in ‘Tomorrowland: a World Beyond’
film review
Arts and Entertainment
Reawakening: can Jon Hamm’s Don Draper find enlightenment in the final ‘Mad Men’?
tv reviewNot quite, but it's an enlightening finale for Don Draper spoiler alert
Arts and Entertainment
Breakfast Show’s Nick Grimshaw

Have you tried new the Independent Digital Edition apps?
Arts and Entertainment

ebooksNow available in paperback
Arts and Entertainment

Arts and Entertainment
I am flute: Azeem Ward and his now-famous instrument
Arts and Entertainment
A glass act: Dr Chris van Tulleken (left) and twin Xand get set for their drinking challenge
TV review
Arts and Entertainment
MIA perform at Lovebox 2014 in London Fields, Hackney

Arts and Entertainment
Finnish punk band PKN hope to enter Eurovision 2015 and raise awareness for Down's Syndrome

Arts and Entertainment
William Shakespeare on the cover of John Gerard's The Herball or Generall Historie of Plantes

Arts and Entertainment

Game of Thrones review
Arts and Entertainment
Grayson Perry dedicates his Essex home to Julie

Potter's attempt to create an Essex Taj Mahal was a lovely treat

Arts and Entertainment
A scene from the original Swedish version of the sci-fi TV drama ‘Real Humans’
Arts and Entertainment
Hugh Keays-Byrne plays Immortan Joe, the terrifying gang leader, in the new film
filmActor who played Toecutter returns - but as a different villain in reboot
Arts and Entertainment
Charlize Theron as Imperator Furiosa in Mad Max: Fury Road
Arts and Entertainment
Jessica Hynes in W1A
tvReview: Perhaps the creators of W1A should lay off the copy and paste function spoiler alert
Arts and Entertainment
Power play: Mitsuko Uchida in concert

Arts and Entertainment
Dangerous liaisons: Dominic West, Jake Richard Siciliano, Maura Tierney and Leya Catlett in ‘The Affair’ – a contradictory drama but one which is sure to reel the viewers in
TV review
Arts and Entertainment
Richard Herring, pictured performing at the Edinburgh Fringe Festival two years ago
Arts and Entertainment
Music freak: Max Runham in the funfair band
Arts and Entertainment
film 'I felt under-used by Hollywood'
Latest stories from i100
Have you tried new the Independent Digital Edition apps?

ES Rentals

    Independent Dating

    By clicking 'Search' you
    are agreeing to our
    Terms of Use.

    Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

    Sun, sex and an anthropological study

    One academic’s summer of hell in Magaluf
    From Shakespeare to Rising Damp... to Vicious

    Frances de la Tour's 50-year triumph

    'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
    'That Whitsun, I was late getting away...'

    Ian McMillan on the Whitsun Weddings

    This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
    Kathryn Williams explores the works and influences of Sylvia Plath in a new light

    Songs from the bell jar

    Kathryn Williams explores the works and influences of Sylvia Plath
    How one man's day in high heels showed him that Cannes must change its 'no flats' policy

    One man's day in high heels

    ...showed him that Cannes must change its 'flats' policy
    Is a quiet crusade to reform executive pay bearing fruit?

    Is a quiet crusade to reform executive pay bearing fruit?

    Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
    The King David Hotel gives precious work to Palestinians - unless peace talks are on

    King David Hotel: Palestinians not included

    The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
    More people moving from Australia to New Zealand than in the other direction for first time in 24 years

    End of the Aussie brain drain

    More people moving from Australia to New Zealand than in the other direction for first time in 24 years
    Meditation is touted as a cure for mental instability but can it actually be bad for you?

    Can meditation be bad for you?

    Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
    Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

    Australia's first-ever Eurovision entrant

    Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine
    Letterman's final Late Show: Laughter, but no tears, as David takes his bow after 33 years

    Laughter, but no tears, as Letterman takes his bow after 33 years

    Veteran talkshow host steps down to plaudits from four presidents
    Ivor Novello Awards 2015: Hozier wins with anti-Catholic song 'Take Me To Church' as John Whittingdale leads praise for Black Sabbath

    Hozier's 'blasphemous' song takes Novello award

    Singer joins Ed Sheeran and Clean Bandit in celebration of the best in British and Irish music
    Tequila gold rush: The spirit has gone from a cheap shot to a multi-billion pound product

    Join the tequila gold rush

    The spirit has gone from a cheap shot to a multi-billion pound product
    12 best statement wallpapers

    12 best statement wallpapers

    Make an impact and transform a room with a conversation-starting pattern
    Paul Scholes column: Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?

    Paul Scholes column

    Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?