Simon Read: Are all challenger savings brands doomed?

 

So financial firm ING Direct has been bought by Barclays bank. That's a decent deal for the bank – it will add an extra million and a half or so savers to its book, plus several thousand mortgage borrowers.

How will it be for ING customers? Logically Barclays will – eventually –end up merging all their customers to offer them the same deals. After all, it would be a bit of a nonsense to have different classes.

The risk would be that some would end up as second-class customers, getting worse rates than others. Of course, that already happens with the many different deals that all financial institutions offer.

But people end up in worse deals because they don't know that there may be better ones available.

But the idea that a bank could deliberately treat whole sections of its customers as second-class citizens is just not likely (although it's perfectly easy to believe that banks treat all their customers as second-class citizens).

So whatever attracted the more than a million people to ING Direct will disappear. Most likely it was the endless advertising promising market-leading rates and great deals. Whoever bought into that will soon find that they've ended up at Barclays with market- desultory rates and ordinary deals.

But, then, we've seen this happen time and time again with new entrants into the financial marketplace in recent years. A big and expensive splash and fine words about "challenging" traditional brands promotes a sudden massive market presence with millions rushing to sign up.

A few years down the line and the new challenger brand is gone, often sold off when its owners realise how expensive and profitless it is offering market-leading rates. Or the owners get into financial difficulties and are forced to flog the business.

"It seems that too often these competitive brands get swallowed up by the banks," says Charlotte Nelson of Moneyfacts, which monitors the interest rates charged and paid by financial firms.

Do you remember Egg? That was launched with a massive ad campaign by the Prudential at the end of the 1990s as the future of online banking.

It had a market-leading credit card deal and great savings rates, as well as interesting mortgage deals. But the bank was sold to Citibank in 2007 and the US giant hoped it would give it a major foothold in the UK. The time was, sadly, off as the credit crunch soon followed and Citibank put Egg up for sale.

The credit card operation was sold to Barclaycard in early 2011 and the savings and mortgage customers to the Yorkshire building society later in the same year. Do those customers who brought into the seemingly exciting Egg concept really feel happy being part of a building society?

Meanwhile, who remembers Standard Life Bank? That was another brand set to shake up the market place. It was bought by Barclays back in 2010 and since then, frankly, the only thing I've heard from Standard Life Bank customers is complaints about lost money or poor rates.

Off the top of my head, I can't think of any new challenger brands that have actually achieved what they claimed to set out to do, to shake up the market. All of them seem to simply build up a reasonably large customer base – and then flog it on to a rival.

Will that happen with some of the newer banks hoping to make a mark this decade? Apart from the supermarket banks – which have a much greater hope of success with the backing of the retail chains – I can't say that I'm feeling positive about any.

Like ING, Egg and all the others the pomp and PR at launch will end with a quiet sale a few years later. The only real losers will be the customers.

We've been waiting for the announcement of British Gas's next price hikes for months since bosses intimated there would be an autumn rise at the beginning of summer.

But the timing this week of news of a 6 per cent increase could not be worse for those already worrying about how to afford their heating as the weather turns bitter.

Ever since its Big Six rival SSE revealed that it would increase prices by 9 per cent for its 5m customers from Monday 15 October, it's only been a question of time before the others would follow. Indeed, after British Gas's announcement yesterday, Npower quickly followed with its own hike of around 9 per cent.

But British Gas remains the UK energy giant, with about 12m homes using the firm, so its price hike will affect the most people.

The fact that the price increase was signalled by the firm before summer, won't reduce hardship for the millions who are already facing a winter of distress. A 6 per cent rise will add around £80 to the average dual-fuel bill. That would push average bills up to £1,318.

The higher prices rise, the more people turn down their heating because they can't afford it. More that turn down heating, means more risk illness or worse. Five years ago, when bills cost less than half what they are today, less than half as many pensioners died from hypothermia.

Last winter, Age UK reckoned that two million older people were so cold that they took to their beds in an attempt to keep energy bills down. Two-fifths admitted turning their heating down because of the high cost despite the fact they were feeling cold.

It's estimated that the number of unnecessary winter deaths this year could soar higher than 3,000.

So while many will moan at higher prices, the problem is fatal for some. But the blame for that cannot just be laid at the door of profiteering energy firms. The current coalition government's cutbacks – particularly on benefits and reducing the Winter Fuel Alliance from £300 to £200 – have had an equally disastrous effect.

But while vulnerable people are forced to choose between heating and eating – often with fatal consequences – wringing your hands about rising prices is simply not enough.

It's time for the energy firms – in partnership with Government and local authorities – to take responsibility for ensuring everyone can afford adequate heating.

s.read@independent.co.uk

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

Sport
footballLIVE: All the latest from today's Premier League matches
News
newsNew images splice vintage WWII photos with modern-day setting
Arts and Entertainment
The star dances on a balcony in the video
music
Arts and Entertainment
Jerry Hall (Hand out press photograph provided by jackstanley@theambassadors.com)
theatre
PROMOTED VIDEO
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Reach Volunteering: Trustee – PR& Marketing, Social Care, Commercial skills

    Voluntary Only - Expenses Reimbursed: Reach Volunteering: Age Concern Slough a...

    Reach Volunteering: Charity Treasurer

    Voluntary Only - Expenses Reimbursed: Reach Volunteering: Crossroads Care is s...

    SThree: Trainee Recruitment Consultant - Soho

    £20000 - £25000 per annum + OTE £35,000: SThree: We consistently strive to be ...

    Ampersand Consulting LLP: Markit EDM (CADIS) Developer

    £50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...

    Day In a Page

    US immigration: President Obama ready to press ahead with long-promised plan to overhaul 'broken system' - but will it get past a Republican-controlled Congress?

    Immigration: Obama's final frontier

    The President is ready to press ahead with the long-promised plan to overhaul America's 'broken system' - but will it get past a Republican-controlled Congress?
    Bill Cosby rape allegations explained: Why are these allegations coming out now? Why didn’t these women come forward earlier? And why has nobody taken legal action?

    Bill Cosby rape allegations explained

    Why are these allegations coming out now? Why has nobody taken legal action? And what happens next for the man once thought of as 'America's Dad'
    Four years of excruciating seizures caused by the 1cm tapeworm found burrowing through a man's brain

    You know that headache you’ve got?

    Four years of excruciating seizures caused by the 1cm tapeworm found burrowing through a man's brain
    Travelling to work by scooter is faster than walking and less sweaty than cycling, so why aren’t we all doing it?

    Scoot commute

    Travelling to work by scooter is faster than walking and less sweaty than cycling, so why aren’t we all doing it?
    Paul Robeson: The story of how an American icon was driven to death to be told in film

    The Paul Robeson story

    How an American icon was driven to death to be told in film
    10 best satellite navigation systems

    Never get lost again: 10 best satellite navigation systems

    Keep your vehicle going in the right direction with a clever device
    Paul Scholes column: England must learn to keep possession and dictate games before they are exposed by the likes of Germany and Brazil

    Paul Scholes column

    England must learn to keep possession and dictate games before they are exposed by the likes of Germany and Brazil
    Michael Dawson: I’ll thank Spurs after we win says defender as he prepares to return with Hull

    Michael Dawson: I’ll thank Spurs after we win

    Hull defender faces his struggling former club on Sunday ready to show what they are missing. But he says he will always be grateful to Tottenham
    Frank Warren column: Dr Wu has big plans for the professionals yet he should stick to the amateur game

    Frank Warren column

    Dr Wu has big plans for the professionals yet he should stick to the amateur game
    Synagogue attack: Fear unites both sides of Jerusalem as minister warns restoring quiet could take 'months'

    Terror unites Jerusalem after synagogue attack

    Rising violence and increased police patrols have left residents of all faiths looking over their shoulders
    Medecins sans Frontieres: The Ebola crisis has them in the headlines, but their work goes far beyond West Africa

    'How do you carry on? You have to...'

    The Ebola crisis has Medecins sans Frontieres in the headlines, but their work goes far beyond West Africa
    Isis extends its deadly reach with suicide bombing in Kurdish capital

    Isis extends its deadly reach with suicide bombing in Kurdish capital

    Residents in what was Iraq’s safest city fear an increase in jihadist attacks, reports Patrick Cockburn
    Underwater photography competition winners 2014 - in pictures

    'Mysterious and inviting' shot of diver wins photography competition

    Stunning image of cenote in Mexico takes top prize
    Sir John Major: Negative West End portrayals of politicians put people off voting

    Sir John Major hits out at theatres

    Negative West End portrayals of politicians put people off voting
    Kicking Barbie's butt: How the growth of 3D printing enabled me to make an army of custom-made figurines

    Kicking Barbie's butt

    How the growth of 3D printing enabled toy-designer to make an army of custom-made figurines