Chequing in with the best

In a wonderful example of stating the obvious, the Office of Fair Trading yesterday published evidence that retail banking in Britain isn’t very competitive. For most people, that will probably come as no surprise. Though customer service has been getting better in almost every other industry, in retail banking limited weekend opening hours, unhelpful call centres and badly designed internet banking systems still frustrate millions of us. You don’t necessarily have to suffer, however.

According to Which? Money, the best way to get good service is to avoid traditional high street banks. In its survey of customer satisfaction, First Direct, the One account and Smile – all internet accounts – came out on top of the rankings, while Bank of Scotland, Halifax and Santander languished at the bottom. City A.M. award winner First Direct in particular provides excellent customer service, being ranked best for satisfaction in current accounts, savings and mortgages.

Explaining the success of First Direct, Paul Say, head of marketing, said: “First Direct was the earliest response to the acceptance that customers were looking for a different way to bank.” One in four First Direct customers signed up after a personal recommendation.

High street banks come out worst in savings accounts too. Many “high interest” savings accounts are in fact nothing of the sort. Lloyd’s TSB offers an “incentive saver” account that in fact pays just 0.04 per cent interest, while Barclays’ “reward saver” pays only 0.10 per cent. Indeed, according to, only one in five current accounts pays any interest at all. By not taking advantage of higher rates available elsewhere, British savers may be missing out on as much as £12bn a year in lost interest.

Peter Vicary-Smith, chief executive of Which?, said: “Time and again, the big high street banks are found to be lacking when it comes to good customer service. People who are unhappy with their bank must vote with their feet and move to a better financial provider.”

In some aspects, internet banks may actually be falling behind, however. Metro Bank, the first new high street bank to open in a century, even opens its doors on Sunday. And according to research by Forrester, a market research firm, the top five bank websites are from high street banks. The list is topped by the Co-operative Bank but also includes NatWest, Barclays and Santander.

The quality of internet banking should be important to banks. According to the same research, British people are among the most active users of internet banking in Europe. And almost 60 per cent of British internet users had researched a financial product online in the past month, more than in any other European country.

Some banks have tapped into that. NatWest, HSBC and Nationwide all now offer iPhone apps. The payment website Paypal even offers an app that allows customers to pay in cheques simply by photographing them.

For some, however, the problem may not simply be a lack of options. Kevin Mountford, head of banking at, said: “Many consumers are reluctant to switch their current account as they feel it’s a complex process giving little benefit.” For those of us who complain, but don’t make the effort to switch, we probably get the bank accounts we deserve.


For interest rates:
The Santander Account (preferred in-credit rate) – an interest rate of 5 per cent on balances up to £2,500
The Lloyds TSB Silver Account – 4 per cent on balances between £5,000 and £7,000

For overdrafts:
The First Direct 1st Account – an overdraft buffer of £250, £100 free when you switch and another £100 if you want to switch back
The Santander Account (preferred overdraft rate) – zero per cent APR on overdrafts for the first year, and only 12.9 per cent after

For rewards:
The Halifax account – £50 cashback when you apply and £5 a month provided you pay in £1,000, even when you are overdrawn

For saving:
The Post Office Online Saver – a minimum investment of £1, unlimited withdrawal and an interest rate of 2.9 per cent, with a first year bonus of 1.25 per cent

For children:
The Halifax children’s regular saver - pays a generous interest rate of 6 per cent