Banks of the future: the new boys on the block

Are banks today too sales focused and do they need to go back to being customer focused?

There are many who agree that there has been a cultural shift away from the 'friendly banker' relationship of the 1970's towards one which is motivated solely by profit. In support of this argument, a recent survey of EP readers found that 76% of people did not believe that banks were business friendly.

Problems accessing finance has had a deleterious impact on the industry for the past 12 months and there has not been much to indicate that this will change in the short-term future. But what is the real implication of this for the financial market?

With greater scrutiny on banking governance and lending criteria, it is little wonder that companies are being forced to provide more robust information, and prove their business models are viable. However, this is exacerbating the situation where the bank's financial wellbeing is more important than an established client relationship.

An idea that is abhorrent to many who businesses rely on service driven values.

Yet, there will soon be light on the horizon. Consumers may need only to pop to their local Tesco (who are launching their own bank) or their home PC to access financial products which bypass banks altogether. Also, the Government may want to sell Northern Rock to a new entrant to the banking industry. Virgin Money's chairman Brian Pitman has already laid down the gauntlet and stated that they will "oversee much needed return of old fashioned banking principles" – and this is one of the potential bidders for Northern Rock. Equally John Kay in The Telegraph recently made this quote on the influence of retailers;

"Powerful retailers such as Tesco and Marks & Spencer use their market position to assess the needs of consumers, and to get the required goods at the lowest cost. Their focus is on developing a relationship with customers based on reliability and value for money. That’s a very different business model from the dismal relationship most people have with their banks, and from the petty abuse of retail customers through penalty charges for minor payment lapses and sale of over-priced payment protection insurance."

The gap between expectation and delivery for many businesses looking for support from their banks has become increasingly wide - with potentially devastating consequences, even for the most established business, un-burdened by excess debt. So, increased competition will force a sea-change, and provide much needed alternatives that challenge the hard-line profit based motives of today’s banking sector.

The Sting in the Tail is that the banks too need to return to being customer focused - otherwise they will be replaced by those companies which are.

Do you have any comments on this topic? We would like to hear your views.
Please email: stinginthetail@epmagazine.co.uk

Here are some comments received from our most recent Sting in the Tail on minimum pricing of alcohol:

"Isn't it strange how often the "solution" to a social problem is to make things more expensive through taxes, duty or, in this case, a legal minimum price? People drink because they need cheering up a bit, sometimes because they are struggling to meet the already high cost of living in the UK. For those to whom alcohol is vital, a rise in the cost will simply mean they have less to spend on other essentials. Yes, a more level playing field could be helpful to the pub trade but wouldn't it be so much better to lower the duty on drinks served in licensed premises to achieve this?? In that way, a few more might survive and continue to provide a relatively safe and well-regulated drinking environment. The treasury earns nothing from a pub that has closed down. Raising supermarket prices will penalise everybody, including sensible moderate drinkers"

And another from an earlier Sting in the Tail on VAT:

"The VAT reduction was of no help at all to either businesses or customers and simply created extra admin costs which far outweighed any small benefit. In addition the country now has an even greater deficit which will be clawed back some other way. It did nothing to increase spending."

Didn't read the last sting in the tail? Read it here