Outlook: Customer care is the key for battling bankers

Savers are being treated to a veritable litany of eye-catching interest rate and new product offerings right now, from established players and newcomers to the market alike. The latest of these comes from the Halifax, which promises to pay a headline rate of a remarkable 7.85 per cent on instant access accounts. This is not quite as good as it seems, since that very high rate is available only on deposits of more than pounds 40,000. For smaller deposits, the rates are not so competitive.

Even so, the initiative is indicative of the way in which the savings and retail banking market is being transformed by new entrants and low cost products. The good news for consumers is that these new highly competitive rates and products are not one offs, brief aberrations that will vanish as quickly as summer snow. In fact, things are just going to get better and better for buyers of financial products. The bad news for shareholders in these companies is that as they do, the profit margins are going to get worse and worse.

Underlying these changes is the rapid development and falling costs of information technology. The effect has been greatly to increase capacity in retail banking and other forms of financial service while simultaneously decreasing the need for big work forces to support them. This in turn is making possible the provision of enhanced services at considerably lower cost. Traditionally high barriers of entry to the financial services industry are falling as technology becomes more widely available and reduces the scale required for low cost operation.

As a result, a range of new entrants - supermarkets, other financial institutions like Standard Life and the Prudential, and entrepreneurs like Richard Branson - have begun to attack what was once the exclusive preserve of high street banks and building societies. The established players have little choice but to compete head on, both on price and service. If they don't, then even taking account of the usual inertia of banking and building society customers, they'll find the ground swept from under them.

In responding to the shock of the new, present market leaders will also need to rediscover some of the basic traditions and attributes of retail banking - most notably in the area of customer care. Time was when your local bank manager could be relied upon to know all about your personal finances and offer usually sound advice on how to manage them.

That at least is the picture most people have of bespoke Victorian banking traditions. Actually, that kind of service was never available to more than a small minority of the relatively well healed. It has all but vanished in the age of banking for the masses. Today, banking is too often about selling - shoving highly priced and disparate products down the customer's throat, sometimes in a way which is positively against his best interests.

Again, new technology and enhanced competition offer the possibility of a return to those traditional banking values and standards of customer care, only this time they will be available to all. Virgin One has already recognised the demand for one stop banking, of offering a rounded reasonably prices customer service rather than a series of different highly priced products.

The more savvy established banks and building societies are beginning to move in that direction too. Unfortunately for their shareholders, this brave new world may prove a good deal less profitable than existing retail banking models.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consulant

£20000 - £25000 per annum + competitive: SThree: SThree are a global FTSE 250...

Guru Careers: Financial Controller

£45 - £55k DOE: Guru Careers: A Financial Controller is required to join a suc...

Recruitment Genius: Sales Consultant / Telemarketer - OTE £20,000

£12500 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

Recruitment Genius: Sales Adviser - OTE £24,500

£22500 - £24500 per annum: Recruitment Genius: Inbound and outbound calls with...

Day In a Page

Mullah Omar, creator of the Taliban, is dead... for the fourth time

Mullah Omar, creator of the Taliban, is dead... again

I was once told that intelligence services declare their enemies dead to provoke them into popping up their heads and revealing their location, says Robert Fisk
Margaret Attwood on climate change: 'Time is running out for our fragile, Goldilocks planet'

Margaret Attwood on climate change

The author looks back on what she wrote about oil in 2009, and reflects on how the conversation has changed in a mere six years
New Dr Seuss manuscript discovered: What Pet Should I Get? goes on sale this week

New Dr Seuss manuscript discovered

What Pet Should I Get? goes on sale this week
Oculus Rift and the lonely cartoon hedgehog who could become the first ever virtual reality movie star

The cartoon hedgehog leading the way into a whole new reality

Virtual reality is the 'next chapter' of entertainment. Tim Walker gives it a try
Ants have unique ability to switch between individual and collective action, says study

Secrets of ants' teamwork revealed

The insects have an almost unique ability to switch between individual and collective action
Donovan interview: The singer is releasing a greatest hits album to mark his 50th year in folk

Donovan marks his 50th year in folk

The singer tells Nick Duerden about receiving death threats, why the world is 'mentally ill', and how he can write a song about anything, from ecology to crumpets
Let's Race simulator: Ultra-realistic technology recreates thrill of the Formula One circuit

Simulator recreates thrill of F1 circuit

Rory Buckeridge gets behind the wheel and explains how it works
Twitter accused of 'Facebookisation' over plans to overhaul reverse-chronological timeline

Twitter accused of 'Facebookisation'

Facebook exasperates its users by deciding which posts they can and can’t see. So why has Twitter announced plans to do the same?
Jane Birkin asks Hermès to rename bag - but what else could the fashion house call it?

Jane Birkin asks Hermès to rename bag

The star was shocked by a Peta investigation into the exotic skins trade
10 best waterproof mascaras

Whatever the weather: 10 best waterproof mascaras

We found lash-enhancing beauties that won’t budge no matter what you throw at them
Diego Costa biography: Chelsea striker's route to the top - from those who shared his journey

Diego Costa: I go to war. You come with me...

Chelsea's rampaging striker had to fight his way from a poor city in Brazil to life at the top of the Premier League. A new book speaks to those who shared his journey
Ashes 2015: England show the mettle to strike back hard in third Test

England show the mettle to strike back hard in third Test

The biggest problem facing them in Birmingham was the recovery of the zeitgeist that drained so quickly under the weight of Australian runs at Lord's, says Kevin Garside
Women's Open 2015: Charley Hull - 'I know I'm a good golfer but I'm also just a person'

Charley Hull: 'I know I'm a good golfer but I'm also just a person'

British teen keeps her feet on ground ahead of Women's Open
Turkey's conflict with Kurdish guerrillas in Iraq can benefit Isis in Syria

Turkey's conflict with Kurdish guerrillas in Iraq can benefit Isis in Syria

Turkish President Erdogan could benefit politically from the targeting of the PKK, says Patrick Cockburn
Yvette Cooper: Our choice is years of Tory rule under Jeremy Corbyn or a return to a Labour government

Our choice is years of Tory rule under Corbyn or a return to a Labour government

Yvette Cooper urged Labour members to 'get serious' about the next general election rather than become 'a protest movement'