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
Arts and Entertainment
The Doctor and Clara have their first real heart to heart since he regenerated in 'Deep Breath'
TV
Life and Style
Apple showed no sign of losing its talent for product launches with the new, slightly larger iPhone 6 making headlines
techSecurity breaches and overhyped start-ups dominated a year in which very little changed (save the size of your phone)
News
The official police photograph of Dustin Diamond taken after he was arrested in Wisconsin
peopleDownfall of the TV star charged with bar stabbing
Arts and Entertainment
Jeremy Clarkson, left, and Richard Hammond upset the locals in South America
tvReview: Top Gear team flee Patagonia as Christmas special reaches its climax in the style of Butch and Sundance
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
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.

iJobs Job Widget
iJobs Money & Business

Selby Jennings: VP/SVP Credit Quant- NY- Investment Bank

Not specified: Selby Jennings: VP/SVP Credit Quant Top tier investment bank i...

Selby Jennings: Quantitative Research | Equity | New York

Not specified: Selby Jennings: Quantitative Research | Global Equity | New Yor...

Selby Jennings: SVP Model Validation

Not specified: Selby Jennings: SVP Model Validation This top tiered investment...

Selby Jennings: Oil Operations

Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

Day In a Page

A timely reminder of the bloody anniversary we all forgot

A timely reminder of the bloody anniversary we all forgot

Who remembers that this week we enter the 150th anniversary year of the end of the American Civil War, asks Robert Fisk
Homeless Veterans appeal: Former soldiers pay their respects to a friend who also served

Homeless Veterans appeal

Former soldiers pay their respects to a friend who also served
Downfall of Dustin 'Screech' Diamond, the 'Saved By The Bell' star charged with bar stabbing

Scarred by the bell

The downfall of the TV star charged with bar stabbing
Why 2014 was a year of technological let-downs

Why 2014 was a year of technological let-downs

Security breaches and overhyped start-ups dominated a year in which very little changed (save the size of your phone)
Cuba's golf revolution: But will the revolutionary nation take 'bourgeois' game to its heart?

Will revolutionary Cuba take 'bourgeois' golf to its heart?

Fidel Castro ridiculed the game – but now investment in leisure resort projects is welcome
The Locked Room Mysteries: As a new collection of the genre’s best is published, its editor Otto Penzler explains the rules of engagement

The Locked Room Mysteries

As a new collection of the genre’s best is published, its editor explains the rules of engagement
Amy Adams on playing painter Margaret Keane in Tim Burton's Big Eyes

How I made myself Keane

Amy Adams hadn’t wanted to take the role of artist Margaret Keane, because she’d had enough of playing victims. But then she had a daughter, and saw the painter in a new light
Ed Richards: Parting view of Ofcom chief. . . we hate jokes on the disabled

Parting view of Ofcom chief... we hate jokes on the disabled

Bad language once got TV viewers irate, inciting calls to broadcasting switchboards. But now there is a worse offender, says retiring head of the media watchdog, Ed Richards
A look back at fashion in 2014: Wear in review

Wear in review

A look back at fashion in 2014
Ian Herbert: My 10 hopes for sport in 2015. Might just one of them happen?

Ian Herbert: My 10 hopes for sport in 2015

Might just one of them happen?
War with Isis: The West needs more than a White Knight

The West needs more than a White Knight

Despite billions spent on weapons, the US has not been able to counter Isis's gruesome tactics, says Patrick Cockburn
Return to Helmand: Private Davey Graham recalls the day he was shot by the Taliban

'The day I was shot by the Taliban'

Private Davey Graham was shot five times during an ambush in 2007 - it was the first, controversial photograph to show the dangers our soldiers faced in Helmand province
Revealed: the best and worst airlines for delays

Revealed: the best and worst airlines for delays

Many flyers are failing to claim compensation to which they are entitled, a new survey has found
The stories that defined 2014: From the Scottish independence referendum to the Ice Bucket Challenge, our writers voice their opinions

The stories that defined 2014

From the Scottish independence referendum to the Ice Bucket Challenge, our writers voice their opinions
Stoke-on-Trent becomes first British city to be classified as 'disaster resilient' by the United Nations

Disaster looming? Now you know where to head...

Which British city has become the first to be awarded special 'resilience' status by the UN?