Customers no longer banking on banks as gripes soar

Five years after the onset of the global financial crisis faith in banking is lower than ever – with fewer than one in ten people thinking high street banks give good value for money.

This week Which? chief executive Peter Vicary Smith told the Parliamentary Commission on Banking Standards the industry had: “lost all credibility”.

In a week which saw fresh revelations about the involvement of senior staff at RBS in Libor fixing the Financial Services Authority (FSA) revealed customer complaints against high street banks rose by 59 per cent in the first six months of the year.

According to a survey of 18,000 global customers by advisory firm CEB, almost half (47 per cent) of global consumers do not trust banks, accountancy firms and private equity firms to act in their best interests.

Out of all European countries confidence in financial providers was lowest in the UK, while the most positive sentiment was among consumers in Spain and Sweden.

The most common concerns of consumers to trigger this low confidence are the inability of financial providers to share consumers’ own values and to offer them clear and simple policies. Only 10 per cent and 11 per cent respectively expressed confidence in these areas.

Meanwhile, 47 per cent of consumers said they did not feel confident that banks could keep their money safe, while only one in ten thought that they could keep their commitments and promises.

Wolverhampton South East MP Pat McFadden, who is leading the parliamentary commission, said the UK banking industry has lost its way: “There has been a huge breakdown in trust since Libor and PPI miss-selling. But it’s not just about trust. We shall be looking at the broader relationship between banks and business in order to get them to invest and create jobs. It’s about the job description of banks.”

Yesterday FSA managing director Martin Wheatley revealed a plan to overhaul the Libor system and accused the British Bankers Association of having “clearly failed” in regulating Libor.

Meanwhile, it was reported the high street banks, which have set aside millions to refund customers for mis-sold payment protection insurance, may run out of compensation money  before the end of the year.

A spokesman for Consumer Focus Scotland said: “The banking sector must take meaningful steps to reconnect with customers. For too long behaviour has been driven by short-term profits, often at consumers’ expense. Incentivised sales should be banned and a proper public debate is needed on the pros and cons of so-called free banking.”

Peter Vicary-Smith of Which? said there was a pressing need for the balance of power to shift back to the consumer: “We absolutely need better regulation – regulation focused not on ticking boxes but on better outcomes for consumers. Better professional ethics and standards is really important. It’s got to be enshrined in legislation. This cannot be done by the industry. The industry has lost all credibility.

“We let the industry try to sort a lot of this stuff out and there was a banking crisis. We’ve had PPI, we’ve had Libor rigging since then. The industry has no credibility out there to sort itself out. This has to be independent.”

According to research by Which? only one out of ten consumers believe banks deliver good value for money. Fewer than four out of ten think banks offer good customer service.Which? is campaigning for a big change in banking, calling for bankers to put customers before sales, to be required to meet professional standards and comply with a code of conduct and to be punished for mis-selling and bad practice.

Michael Ossei, personal finance expert at uSwitch.com, believes new entrants into the banking market such as Tesco and Marks and Spencers could mount a real challenge to the high street giants: “Consumer confidence in banks has been battered these last few years. In fact, it’s a telling reflection of the UK banking industry that consumers are willing to put their trust in brands that have no previous banking experience. While traditional high street banks are still generally viewed as the most secure and experienced providers to bank with, new entrants are hot on their heels and winning customers over with their untarnished reputations and promise of superior rates and customer service.

“People need to feel they can walk into their bank and ask for advice without feeling scared they will be pressurised into buying something – it’s consumers who end up losing out when banks employ a sales incentive scheme. This culture has been rampant in the banks for far too long. It’s essential that banks move away from being driven by sales targets and instead encourage their staff to focus on delivering the sort of customer service consumers expect and deserve.”