Will increased competition improve banks' poor customer service?

Published by Jeff Prestridge on 23 June 2011.
Last updated on 06 July 2011

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Competition. Good old competition. We need more of it in personal banking services if downtrodden customers (you and me) are finally going to get a better deal from our banks.

It's not just me saying this (although I have been saying it for ages). Now, everyone is saying it - from the great and the good at the Independent Banking Commission who have been asked by the government to look at improving the country's banking industry (its final recommendations for reform are out in the autumn) through to powerful consumer lobby groups such as Which? and Save Our Savers.

Everyone, that is, apart from the big banks with their vested interest in maintaining the status quo. The banking industry's lobby group, the British Bankers' Association (BBA), would have us believe everything is - and always has been - hunky dory in the banking world.

Third-rate service

Of course, the ever-rising volume of complaints tells a different story. Most of our big banks consistently provide third-rate customer service and get away with it because their main competitors aren't any better. Many dissatisfied customers only stay with their existing bank because they adopt a 'better the devil you know' attitude.

Have a look at our Customer Service Awards page for the complete rundown on who you voted best and worst for customer service.

So where is this customer-enhancing competition going to come from? Well, Co-operative Bank, the self-proclaimed ethical bank, is currently making a good fist of things, aided and abetted by its internet banking offshoot, Smile.

Although the Co-op has been around since 1872, it's only in the past couple of years, since the purchase of Britannia Building Society, that it's really begun to lure customers away from the big banks.

Currently, it has some 1.2 million bank account customers - a miniscule number when measured against the established banks - but last year it saw the number of customers switching to it jump by 79%.

Once Britannia is properly absorbed into the Co-op business in just over a year's time, and the Co-op's administrative systems have been overhauled and given a good polish, expect it to become a major banking force, especially if it continues to deliver something its main rivals fail to do - exemplary customer service.

Indeed, the Co-op is busy testing how it can integrate banking services into some of its food stores. Fancy that! A bank increasing its presence on Britain's high street.

Metro Bank

But Metro Bank is doing the same, albeit within the confines of the M25 motorway. It's still early days for Metro Bank; its branch network has yet to dribble past the double-figure mark (its latest branch, its sixth, opened in May on well-to-do Kensington High Street in west London), but it's already making waves, with its focus squarely on delivering quality customer service.

Of course, there's more to banking than bank staff with brilliant white smiles, but Metro's efforts are certainly a step in the right direction.

Last but not least, let's not forget the customer choice that building societies can, and do, provide.


Although the financial crisis has inflicted much damage on the building society sector, it has forced most mutually owned societies to do what they should never have stopped doing. Once again, they're concentrating on offering the public traditional savings accounts, and doing a bit of residential lending where they can.

Coventry (First), Cumberland (Reward Current), Leeds (Premier Current), Nationwide (FlexAccount) and Norwich & Peterborough (Gold Classic) are among those building societies that presently offer bank accounts, in addition to traditional savings accounts.

They're all worth more than a cursory glance, especially when the banking experience is enhanced by a commitment to customer service, as it is with Coventry.

Banking competition? Bring it on.

Jeff Prestridge is personal finance editor of Financial Mail on Sunday.

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