Jump on the current account bandwagon crack
When major household brands such as Virgin, Tesco and the Post Office said a few months ago that they wanted to launch their own current accounts, many customers at the big High Street banks imagined a new banking dawn was about to break.
Figures from the Financial Ombudsman Service show more than 80,000 complaints were received in the second half of 2009 against financial services companies, with more than 20,000 of them against Lloyds Banking Group through its various brands - Lloyds TSB, Halifax and Bank of Scotland.
Royal Bank of Scotland (including NatWest) attracted nearly 5,000 complaints. That's roughly a thousand more than Santander - the Spanish owner of Abbey, Alliance & Leicester and Bradford & Bingley.
Lloyds, in its defence, says it has more than 30 million customers, and will deal fairly and consistently with each complaint.
However, a new generation of banks aims to challenge the ancient leviathans.
American-owned Metro Bank has gained Financial Services Authority (FSA) approval to win the first full-service banking licence for a new High Street bank since the 19th century.
The first two Metro Bank branches will open in the second quarter of 2010, in the Holborn and South Kensington districts of central London. Others will follow in Fulham Broadway and Borehamwood, Hertfordshire, and the network across Greater London should top 200 by 2020.
To 'surprise and delight' each customer, Metro Bank will offer extended opening hours over seven days a week, online banking, a 24/7 customer call centre located in London, a rapid opening procedure to supply new credit and debit cards within 15 minutes in branch, free coin counting machines at every branch and even a welcome (water bowls and biscuits!) for customers' dogs.
Metro Bank vice-chairman Vernon Hill says: "At Metro Bank, the customer is king and our goal is to reinvent British banking by building fans, not customers."
Clare Francis at Moneysupermarket.com says: "Metro Bank is promising a brand new take on retail banking.
"Even before we've seen any of its products, Metro Bank will have made competitors sit up and take notice; customer-friendly opening times, no 'stupid' bank rules, instant issue of cashpoint and debit cards and so on, are all a refreshing take on how banking could and should be done.
"If Metro delivers on its pledges it should be great for consumers who will benefit, as it raises the bar in terms of customer service, branch facilities and products."
Metro Bank won't discuss its charges, however, Virgin Money chief executive Jayne-Anne Gadhia is more forthcoming.
"Most people know there is no such thing as free banking," she told The Sunday Times. "Banks have to cover the cost of free current accounts with hidden charges, such as overdraft fees.
"We're definitely planning to charge for current accounts, and be transparent about it."
"Virgin has indicated a low monthly fee and a fairly low overdraft rate," he says. "But it remains incredibly difficult for new providers to pick up a significant market share on current accounts.
"They must offer something fantastic to get numbers up quickly, and that will be the problem for Virgin. For example, you already get interest free, authorised overdrafts on accounts with Barclays and Santander, providing you pay in at least £1,000 per month, and with Alliance & Leicester, pay in at least £500 per month".
Over the next 18 months, even the most disgruntled of bank customers is likely to sit on the fence. Why should they commit to a new current account until new providers show their hand?
Meanwhile, Defaqto has analysed 121 full-service current accounts, rating them from one to five stars.
Some 63 accounts are free (if the accounts stay in credit) and 58 are packaged accounts with add-ons, such as travel insurance, breakdown cover, mobile phone insurance and identity theft protection and cost from £5-£25 per month.
The average monthly fee for a current account, says Defaqto, is £14.98.
There is also a tendency to direct attractive mortgage products to current account customers; Halifax, HSBC and NatWest all offer cheaper mortgages to their current account customers.
For consumers who are determined to enjoy fee-free banking, Santander claims that more than 22 million consumers could qualify for its ZERO Current Account, which promises a market-leading interest rate on balances up to £2,500 in the first year, no overdraft fees, free ATM access around the world and no charges on purchases using a Visa Debit card worldwide.
Initially available to mortgage customers, it is being extended to holders of any Santander investment product with a minimum value of £1,500.
Consumers who are ready to pay for packaged accounts, on the other hand, must be sure that the extras enjoyed on any account justify the monthly charge.
Black says: "Look carefully at the quality of extras and incentives on offer. Does free travel insurance cover your wife and children? Does it apply to Europe, America and the ski slopes?
"If you are a pensioner, getting travel cover isn't always easy. So NatWest's travel insurance, with no age limit, has obvious attractions for older pensioners."
Perhaps the long-awaited banking revolution could come down to this: If we all end up paying for a current account, what do we get in return?
Black explains: "Banks see current accounts as the main relationship builder with customers, and the key to understanding their financial capabilities.
"The cross-selling of other products onto the existing customer base will become the key battleground as each bank strives to become a one-stop shop for all the personal finance needs of its customers."