Simon Read: After its successful flotation, the struggle to gain customers' trust begins for TSB
Paul Pester seemed pretty pleased with himself yesterday. After shares in TSB were 10 times oversubscribed, the bank's boss said: "It shows there is real appetite for a different kind of bank – a high street bank, not a Wall Street bank – which is focused on customer service.
"We are now focused on delivering on our strategy of bringing more competition to high street banking across Britain."
We certainly do need more competition. But will TSB – which has 4.5 million customers – deliver it? I've been critical of the bank's claims in the past but maybe it's time to give it a chance to prove itself now that it has finally split from Lloyds Banking Group.
What has the bank promised to do that is different? In its prospectus it said: "We were created to bring more competition to the UK banking market – to be a real challenger to the big banks and to deliver better banking for all British consumers."
That's all good. We all desire better banking. TSB went on to say it "purely serves local customers and local businesses, in order to fuel local economies, and so help create thriving local communities all across Britain and nowhere else."
That sounds a little parochial, doesn't it? It does to me. And does it actually promise much-needed help for local communities? Not really. Frankly, until I see evidence of a bank actually doing good in communities, I simply won't believe it.
Smaller banks, such as the ethical Triodos, publish details of where all your money is used and it operates on strict principles. It says: "We only lend our savers' money to people and organisations who are working to make a positive impact – culturally, socially and environmentally."
What does TSB say? "We use every penny TSB customers deposit with us to fund mortgages and loans for other TSB customers. And nothing else."
That sounds a bit of an empty promise, too. To become a TSB customer, you simply need to apply for a loan, so the TSB's promise could actually be read to say: "We use your money to lend to anyone."
But, as I said at the start of this column, let's give TSB a chance now. As much as I admire Triodos, it's never going to be a mainstream bank. TSB does have that chance and I would love to see it really take on the other high street banks.
To be a success it needs to focus on customer service, as Mr Pester promised yesterday. Gimmicks such as paying 5 per cent interest on credit balances on current accounts are not the way to engender long-term loyalty. The bank will only do that by delivering on Mr Pester's promise.
FirstDirect – a genuine force for Positive Change
One major bank consistently wins accolades for its service. It's the online bank FirstDirect, owned by HSBC. This week it was named Best Banking Brand in the Which? Awards.
The consumer organisation said: "FirstDirect has top customer scores for current accounts, savings and mortgages, and takes fourth place for credit cards.
"Feedback about its customer service is unmatched by any other banking brand. It's the only bank to achieve five stars for customer service when dealing with queries for both current and savings accounts.
"And our previous investigations into savings and financial complaints have shown that very few of its customers have cause to complain."
I remember when FirstDirect was launched 25 years ago as a telephone-only bank. Some scoffed then that it wouldn't survive without branches. But it has not only survived, but thrived.
That's the challenge for other new banks, such as TSB. FirstDirect's success is down to one key factor. It's not that it pays the best rates or has the lowest charges. It doesn't. The not-so-secret key to its success is good customer service. It does things efficiently and puts them right quickly when things go wrong.
Customers like that. Sure there are some that are happy to chase market-leading deals and switch regularly to save a few pennies or get a bit more interest on the savings. But there's a silent majority, I believe, that simply wants a bank it can rely on.
The challenge for high street banks in the future should not be to launch market-leading rates, but to provide decent deals backed up with first-class service.
Which? also presented Martin Wheatley, chief executive of the Financial Conduct Authority, with its Positive Change award for "starting to shift the culture of financial regulation and for making a clear commitment to put the interests of consumers first."
It praised the FCA for showing "a willingness to understand the behaviour of real consumers."
I don't want to carp, but it's about time it did try to understand them! Like the banks, the City regulator must keep consumers at the heart of its business.
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