Banks go hi-tech and bring back the good old days

They're putting mobile branches in rural areas and all their services on our mobile phones. Sam Dunn asks if this mix of past and future will really help consumers

It's called mobile banking but the term takes in two very different things at both ends of the evolutionary scale.

By December, it was revealed last week, many of us will be able to use our mobile phone handset as a virtual ATM - short of it spitting out cash, of course. We'll be able to initiate a balance enquiry, see a mini statement of recent transactions and, for pay-as-you-go users, top up credit using bank details stored in the handset - doing away with the need to use a credit card or retailer.

MobileATM, a joint project between technology company Morse and major banks - with First Direct leading the way - is a leap forward from the simple text message alerts of bill payments already offered by many high-street banks.

In Japan, thousands already use credit stored in their mobile phone software to pay for small goods such as soft drinks, papers and cheap rail tickets.

But at the other end of mobile banking's frontier, things are moving at a far slower pace. Later this year, a large van decked out inside as a bank branch is set to trundle through Cornish lanes visiting homes in isolated areas. It will provide basic facilities, allowing customers to make cheque and cash deposits, and exchange currency.

NatWest is the driving force behind this initiative, picking up where HSBC left off in January when it abandoned the same rural service as "uneconomic".

However, be it cutting- edge technology or a lumbering four-wheeler, 21st- century banking is about choice and giving customers what they want.

That, at least, is what the banks tell you. Ask consumer groups and you'll hear a different story.

Which?, for example, is continuing its firestorm of protest at banks' treatment of customers. Its latest report, Give Us Back Our Money, details the many wheezes used by banks - such as flat fees on card purchases made abroad - to rack up billion-pound profits each year.

"There are clear signs that they're ripping people off. They need to start treating customers much better," the research thunders.

There's disgruntlement too from the Campaign for Community Banking Services (CCBS), which is lobbying for an unbranded "shared bank" in rural areas. In May, its proposal that all customers be allowed to use a single front office for basic services was rejected by the British Bankers' Association (BBA) on grounds including anticipated low use and the growth of internet banking.

Derek French, director of the CCBS, called this a "blinkered approach".

So who's right?

The answer may lie somewhere in the middle - consumers do have a bit more choice and it is up to them to follow the best deals. After all, no bank always gets its service right or offers the best rate of interest.

But one thing is certain: in their hunt for new customers, banks are switching their focus to what was once considered an outdated concept: the branch.

Consultancy Booz Allen Hamilton recently revealed that 80 per cent of bank/ customer relationships are forged in the branch.

And the growing realisation among banks that they have missed a customer service, and sales, trick is now fuelling huge investment in the UK's network of branches.

NatWest is midway through a £150m refurbish- ment after reversing a programme of branch closures at the turn of the century. It now has 1,630 branches, just down on 2000's 1,643.

HSBC, meanwhile, is spending £80m on upgrading interiors, and during lunchtime priority goes to its existing customers.

And with the arrival of new financial advice rules allowing banks to sell not just their own products but insurance, pensions and investments from other providers - so making commission - they are rushing to build more private "interview" areas inside their branches.

NatWest, HSBC and Barclays have all introduced 1,000 extra "front-line" staff during the past year to try to improve customer service.

It's a far cry from the closure programmes of the 1990s, when the branch was seen as an expensive liability compared with the seemingly boundless opportunities offered by internet banking.

In 1999, there were 11,497 branches, says Brian Capon of the BBA. "At the end of 2004, the total was 10,388. It's not the fall that people anticipated."

One in five savings or current accounts are now set up for internet banking, though, against barely 1 per cent only six years ago.

But the force is with branches. Lloyds TSB is just one bank pursuing the "back to the future" policy last in favour in the 1960s. It is giving power to local branch managers to open on bank holidays in shopping centres or late in the evening for commuters, and to resolve customer complaints locally.

More than 60 per cent of Lloyds TSB's customers now use a branch at least once a month, says Graham Lindsay, head of the bank's branch network. "With their more complex product purchases, they still want to talk to somebody."

Anyone thinking of switching as a result of the current account war (see News, page 23) should ask exactly what they want from a bank before plunging into the latest head-line-grabbing deal, says Which?'s Melanie Green.

High savings rates are no longer restricted to online accounts; service isn't always best face-to-face (witness First Direct's success in customer satisfaction surveys); and current accounts with fees are rarely good value for money. So check before you choose.