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The High Street bank re-imagined

The UK is braced for a new breed of High Street banking chain. Is it possible for them to overcome the frustrations with which savers and borrowers have become familiar?

Imagine it: a bank with branches open when you need them - at evenings and weekends. Or even 24 hours a day.

Maybe you'd rather you could transfer money from your account straight away, rather than waiting five working days. Alternatively, how about extra counter staff to eliminate queuing?

Now you can turn your dreams into reality. As long as you have a hefty deposit insurance scheme. And a licence from the Financial Services Authority. Not forgetting a few million pounds in start-up capital.

OK, so it may not be an option for everyone. But the prospect of fresh competition to challenge the widely-reviled UK banking establishment at least offers the possibility of a shake-up.

In the wake of the credit crunch, with public service cuts about to bite as a result of multi-billion pound bank bail outs, the sector has never been less popular.

But when it comes to customer service and satisfaction, the industry has long been renowned for its ability to exasperate and annoy.

Practices such as punitive overdraft charges, habitual long waits to see counter staff and doors that shut at 5pm sharp are without parallel among any High Street retailer.

But some of this, at least, could be about to change if imminent challenges to the so-called "big four" - Lloyds TSB, Barclays, RBS and HSBC - prove successful, and consumers find themselves in a position to demand better.

Newbank - A 21st Century concept

A new venture, code named Project New Bank, is reported to be preparing to bid for 600 branches which Lloyds is being forced to sell off as the price for accepting tax-payer aid during the 2008 banking crisis.

The US-based JC Flowers is in talks to take over the building society Kent Reliance in a bid to acquire a foothold into the UK market.

And on 29 July, a new venture called Metro Bank is due to open its first branch in Holborn, central London, before rolling out across the capital and, backers hope, the rest of the UK.

In a bid to take on the established players by focusing on consumers, branches of Metro Bank will be open from 0800 until 2000 and at weekends. Cashiers will not be shielded from the public by security screens, and managers hope that free services like coin-counting machines, toilets and biscuits for the dogs of passers-by will attract new customers through their doors.

Sceptics note that getting people to switch current accounts is notoriously difficult, but Metro Bank chairman Anthony Thomson believes its is simply a question of giving the public what they want.

"For the first time, we're going to treat banking as a retail industry," he says. "Consumers don't need convincing. There's a huge pent-up demand for better service.

"Banking has been a cosy oligopoly for too long. People will vote with their feet."

Nonetheless, the service will come at a cost: Thomson admits Metro Bank savers will have to accept less favourable interest rates in return for the superior customer experience.

Still, the landscape of banking is, unquestionably, changing.

Spanish finance group Santander has become a familiar sight on the streets of the UK since it acquired Abbey National in 2004, and is currently bidding for 318 RBS branches.

Sir Richard's Branson's Virgin Money - which failed in a bid to buy Northern Rock - is hoping to gain a foothold on the High Street while supermarket chains such as Tesco are offering financial products to customers.

But will this extra injection of competition actually improve the levels of service the public can expect?

Phil Jones, personal finance campaigner with the consumer group Which?, says any new challenge to the big four can only be a good thing.

But he fears that the obstacles any such venture will face could prevent the public seeing the benefit.

"My concern would be that the barriers to entry are so huge that they will make new entrants uncompetitive," he says.

"Then again, what the customer currently expects is often so bad that almost anything could be an improvement. What people actually want are better service, simpler products and lower, fairer charges - if anyone can offer that it will be a massive step forward."

Indeed, Mr Jones notices that the highest customer satisfaction ratings tend to lie with internet/phone-only banks such as First Direct - suggesting that those who, for whatever reason, are unable or unwilling to join the online revolution have the most to gain from any new High Street outlets.

But Robert Shaw, honorary professor of marketing at Cass Business School believes the fault is partly with the public - who expect too much. The peculiarly British expectation of a free current account restricts the scope for improving the banks' end product, he says.

Nonetheless, he believes that anyone setting themselves up as the plucky underdog taking on the City's financial megaliths is well-positioned to win public affection.

"Whatever they do, they definitely shouldn't attempt to be folksy by doing things such as calling the ATM the Hole in the Wall, like Barclays," he says. "It's condescending and the public can see through it.

"Honesty, security, integrity - these are the things people want from a bank. If you can get all this across while reminding people that you weren't responsible for the crash, then you've got a brand."

So there you have it. What's stopping you? Apart from the lack of share capital, obviously.

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