Browsing "Commentary / Editorial"
The Government has convinced major banks to support the creation of a new tool that will direct people towards the best value current account for their needs.
Britain’s biggest current account providers will help to create a tool that can read data from a customer’s existing current account and identify which are the best value accounts for that customer.
Barclays, HSBC, Lloyds Banking Group, Nationwide, the Royal Bank of Scotland, and Santander have all agreed to participate in the new state-backed system.
How will it work?
Under the new system, customers will be able to export a year’s worth of transaction data from their account in a format that can be read by the comparison tool. Once the tool has analysed this data, it will then suggest the most suitable account from a wide range of providers.
So, a customer with high council tax or domestic bills might be recommended the Santander 123 account, which offers cashback on these categories of spending.
A customer with a high average in-credit balance is likely to be recommended an account that offers interest, such as TSB or Nationwide, which both offer 5% for at least the first 12 months.
On the other side of the coin, customers that dip into the red frequently should also be able to discover through the new tool whether there are accounts with cheaper overdraft facilities available.
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A mere 12 years ago, I embarked on a sixth-form economics tour of the city of London, which included many major institutions, from Goldman Sachs to the Bank of England. But there was one trip that sticks out above all others, and it has a certain resonance at the moment.
In the heady pre-recession days, there was an almost fearless confidence in 2002, which was reflected almost universally in the city. Even as a fledgling teenager, it wasn’t difficult to sense the hubris; the whole financial sector was swimming in it.
Consequently, a week of trips to see economists, researchers, traders and fellows, produced a disappointingly bland range of responses.
What was abundantly clear was that banks pursued a higher risk mentality – perhaps with some justification in the early 2000s. The presiding ideology was that it was better to push for higher growth, even if that meant higher inflation. Yes, it was less prescient for stability, but the rewards were worth it.
Perhaps it’s little wonder that we’re now watched over by the Prudential Regulation Authority (PRA). This new body, run by the Bank of England, was devised as part of the latest regulatory shake-up to prevent firms from upsetting financial stability.
Then something changed.
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You might have caught wind by now of the hedge fund manager who has repaid £42,550 for five years of fare dodging. The thought that our extortionate rail fares subsidise crooks like this leaves a bitter taste in the mouth. But another current thorn in my foot regarding rail fares is the issue of what I would loosely call ‘insurance’.
I now routinely split my tickets if I’m travelling any distance, as it save bundles on the cost.
For those not familiar with this practice, it’s when you split a journey into two or more smaller legs and buy separate tickets for each one. Chances are you’ll pay far less for your journey than you would if you purchased a direct single. (Check out our step-by-step guide on split-ticketing here.)
The downside is that splitting your tickets this way can be risky on two fronts.
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It’s hard not to be impressed by TSB’s latest campaign to promote its new Classic Plus current account.
The bank’s new television advert highlights the strengths of the account – namely, 5% interest – by targeting what TSB terms “the usual funny stuff”: that is, the techniques regularly used by banks to attract customers.
We’ve prattled on about these ‘techniques’ before. Banks tend to offer attractive introductory rates (or, as TSB terms it, ‘teaser’ rates) that quietly vanish after a year or so, leaving customers with the same kind of drab, uncompetitive terms they had to endure previously.
With the focus now switching to current accounts following the launch of the new fast-track switching service, this is where the ‘teaser rates’ now operate.
Nationwide, for example, is offering 5% interest through its FlexDirect account, but only for a year. The interest applies to balances of up to £2,500 for twelve months, after which the account reverts to just 1%.
Let’s make no mistake – it’s still a very strong offer. Those with savings of between around £2,000 and £4,000 will struggle to find a better rate anywhere else. Deposits here are fully guaranteed by the FSCS, unlike peer-to-peer sources or investment schemes, and customers retain instant access to their cash.
But after one year, the main perk of the account is gone.
Aware that its own 5% Classic Plus account competes with Nationwide for interest-seeking customers, TSB is driving home the message that the Plus account is not supported by a teaser rate. For now, at least, it’s 5% for good.
So the ad’s cake metaphor is quite apt. It is easy to get fed up at having to constantly chase good offers that neither hang around nor last long enough.
And it’s brave for a bank to run with this kind of transparent, whistleblowing-style rhetoric. The ad demonstrates now the “usual funny stuff” works before explaining how TSB plans to distance itself from it.
On the one hand, TSB gets away with this because it’s a relatively ‘new’ bank, having re-launched as a standalone from Lloyds last year. An established high-street lender taking this approach leaves itself wide open to accusations of double standards. “Why didn’t you offer this before if you’re offering it now?” would be a perfectly fair question to ask.
On the other hand, it’s a strong product. Compare this to RBS (including NatWest), which has tried to demonstrate its new impeccable moral rectitude by axing all products with introductory rates. RBS has now left itself with nothing competitive, which doesn’t do its customers any favours at all.
The only problem with TSB’s approach is that we’ve become a nation of cynics when it comes to banks and banking practices and it’s hard not to feel a little suspicious at its whiter-than-white approach.
The ad is launched alongside a new web hub on Truth and Banking, which offers customers a more transparent explanation of how the new self-acclaimed ‘local lender’ makes money. The animation heading up this section is another injection of transparency into how banks are run.
To be fair to TSB, it doesn’t descend into overkill, constantly bleating that “there’s no catch”. Had it done so, we’d probably be thinking about nothing else but the catch, precisely because a bank told us not to. Nonetheless, we find ourselves asking: “a truthful, straightforward bank? There’s got to be a catch somewhere?”
It’s not as if the bank isn’t anticipating this. Nigel Gilbert, the bank’s Chief Marketing and Communications Offer, is right when he says that customers will want proof of intention through the bank’s products rather than words. We’re all sick of words.
At TSB we have set ourselves the challenge to tackle the issue of trust, not by words but by giving our customers what they want and ought to have – simple, straight forward products and services and transparent information from a bank that is committed to fueling local economies and helping local communities thrive.
It’s a refreshing approach. But before we get carried away, let’s remember: the new 5% Classic Plus account is variable. So, now that TSB has gone to the trouble of educating us about ‘cost awareness’, don’t be too surprised if the rate begins to drop as soon as customer numbers rise.
I should be celebrating a victory for consumers today after the Royal Bank of Scotland and NatWest announced the decision to scrap bonus-based personal finance products. Instead, I’m left slightly puzzled by the move – especially the axing of balance transfer cards – and wondering if the RBS Group is cutting off its nose to spite its face.
RBS’s plans to axe introductory “bonus rates” on savings accounts follows a similar pledge from HSBC last week, as high-street banks hope to win back public trust.
RBS will end 0% balance transfer credit card deals and plans to make all products equally priced whether applications take place in branch or online.
That’s a lot of changes – not only to its existing product base, but also to the Group’s fundamental principles of selling.
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I’m mighty proud of my Sunderland (or Mackem) roots, but every so often your hometown drops a monumental clanger that you cannot overlook.
If you happen to Google my name, for instance, you’ll see that I happen to share a name (and hometown) with a very different type of character. I think I’m justified in calling that one of life’s more unfortunate coincidences.
And as this week happens to be the deadline for tax returns, it didn’t escape my notice that a firm operating out of Sunderland has been caught in a devious act of skulduggery.
Who4, which is predominantly based out of an office near Southwick in Sunderland, operates a number of ‘copycat’ Government websites that charge hefty sums for completing rudimentary applications including tax returns, passport applications, and driving licenses.
The site to have made most headlines is taxreturngateway.com, which has drawn hundreds of angry complaints from customers who believed it was the official HMRC self-assessment gateway.
Having paid a typical fee of £400, they later discovered that this was an administration charge rather than a tax payment, and in some cases that the preliminary calculations provided by the site were often radically different from the genuine picture.
The site notes that it is not affiliated to HMRC and that it is providing an additional service, but it’s not a warning that has been clear enough for stressed consumers to heed.
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