Jeff Salway: Banks could do a lot worse than build links to customers

Published on Friday 28 August 2009 19:23

TALK of silver linings to the economic crisis apparently vanished into thin air at the first hint of a recovery, but some ideas have been given vital room to breathe.

Projects that would have been given short shrift three years ago have been given greater consideration, not least those seeking to address the growing gulf between banks and their customers.

Fairbanking is one such example. The charity recently concluded two years of research with a report setting out ways in which the banks could better promote financial awareness among consumers and do more to improve their financial wellbeing.

The author of the report was Anthony Elliot, who as a former director of group risk at Abbey National offered an insight that lent added weight and credibility to its findings. He came up with a nutshell analogy comparing banks to car manufacturers who sell vehicles that can go faster and faster but who neglect to work on the brakes and airbags. The results are self-evident and the report sets out ways in which banks could regain consumer confidence by using their unique position to improve the financial wellbeing of their customers.

Elliott called on banks to encourage families to keep their level of debts as a proportion of their income as low as possible; encourage young workers to think of their money in "pots" put aside for different things; and encourage people to tailor their discretionary expenditure to life events, such as moving house or a fall in earnings.

To do this, he proposed that banks could develop simple financial planning tools to help people manage their budgets, build savings and reduce their overdraft and credit card debts.

The proposals are not only logical, but in the interest of both banks and customers. With Scotland's biggest banks now owned primarily by the taxpayer, now would seem a good time to lift customers a few notches up their priorities.

Sadly, these proposals are doubtless too enlightened, even if there is still some appetite for re-evaluation after last year's banking crisis.

The problem is that, if anything, banks and the authorities are more concerned with going back to basics and creating new layers of compliance that will further widen the gulf between banks and customers.

I hope I'm wrong, but there appears to be very little appetite among financial institutions to take the big steps needed to rebuild consumer trust.

What better way to embark on this then by introducing practical measures that can help improve their customer's financial awareness and wellbeing?

ONCE upon a time, in a galaxy far, far away (South Wales, to be precise), one 18-year-old somehow managed to forget when his A-level results were coming out. Come the day, his mum had to remind him to go to school and pick up the results, although in the event he wished he hadn't bothered.

The coverage of the Highers results this month reminded me of that day, many years ago. One thing I definitely don't remember is being offered all manner of student account freebies by high street banks desperate to secure my custom. This market has become competitive in recent years, as banks have woken up both to the cross-selling opportunities of customers once they graduate and start making money, and by the revenue generated by overdraft charges on student accounts.

The latter is what most students should probably be concerned about. The savings made by opting for the accounts with the best overdraft facilities far outweigh most of the perks on offer, such as iPods, cash and discounts on laptops. Attractive as these may seem, students preparing for college would do well to focus on the dull stuff that could make a huge difference over four years. Overdraft limits vary by bank, as do the charges levied for going over them. This year's graduates will already attest to the difficulty of coping with debts when leaving education, particularly in the current job market, so the importance of opting for the most suitable student bank account should not be understated.