For the first time in over 150 years a new high street bank - Metro Bank - will be opening its doors to customers. Under the slogan 'Love Your Bank' it will be hoping to entice people away from the traditional banks.
But with Tesco Bank and Virgin Money looking set to follow suit, will consumers welcome the new kids on the banking block or dismiss them as a chip off the old block?
* Welcome change: 57% of banking customers are looking forward to having a real alternative to existing high street banks, but only 38% would consider moving their main current account to a brand new bank
* Righting wrongs: 45% believe that new entrants will learn from the mistakes made by the traditional banks, but 31% are concerned that the new banks won't have enough knowledge or experience of banking and 11% wouldn't be confident that their money is safe
* All about trust: just 14% trust their existing bank completely, while 39% trust their current bank to a degree, however over a third (34%) say that new entrants would not be as established or secure as traditional banks
* Easy wins: 57% of people view the UK banking industry in a dim light - main criticisms are rubbish interests rates (73%), overcharging (74%) and penalising loyalty (61%) - all areas where new banks could win people over
* Breath of fresh air: 66% of critics blame existing banks for the financial crisis while 76% are fed up with 'fat cat' bankers - but 51% of people think that new banks offer a fresh start while 37% say they will be innovative and will change banking for the better.
With critics blaming banks for the financial crisis and consumers fed up with 'fat cat' bankers, now should be a good time for a new bank to come into the market and win lots of customers. However, new research from uSwitch.com, the independent price comparison and switching service, reveals that new entrants planning on challenging the banking heavyweights may still have their work cut out for them.
The landmark opening of Metro Bank's first branch is expected early this summer, with Virgin Money, Tesco Bank and Walton & Co expected to follow suit. But while 57% of people are looking forward to havard to having a fresh alternative to the existing high street banks, just 38% would actually consider moving their main current account to a brand new bank. Instead, consumers are likely to test the water first with a 'low risk' account - 67% would consider taking out a savings account with a new bank and 43% would take out a credit card.
Given the financial crisis that Britain has been through, perhaps this lukewarm welcome isn't such a surprise with consumers highlighting concerns over security, confidence and expertise. Over a third of people (34%) are worried that a new entrant bank won't be as established or secure as the traditional banks, while 31% are concerned that they won't have enough knowledge or experience of banking. One in ten (11%) aren't confident that their money would be safe or their funds protected even though a new bank would need to meet stringent requirements in order to operate in the UK.
But the traditional banks may still have a battle on their hands. Overall, almost three quarters of consumers (72%) recognise that new banks will lead to greater competition, resulting in better products and services. Over half of consumers (51%) say that new banks will offer a fresh start and a new way of thinking, while 45% think they will be able to learn from the mistakes made by traditional banks. Over a third (35%) appreciate that many of the new banks are established, trusted and successful brands, albeit in other sectors or markets and 37% believe they will be more innovative and will change banking for the better.
More importantly, the established players may be hampered by current negative consumer sentiment towards the banking sector. Just 14% of people trust their current bank completely while 39% trust their bank to a degree. 57% of people view the UK banking industry in a dim light with main criticisms centred on poor interests rates (73%), overcharging (74%) and penalising loyalty (61%) - all areas where new banks could win people over.
Moreover, 67% of critics blame existing banks for the financial crisis while 76% are fed up with 'fat cat' bankers. This gives new banks a clear opportunity to distance themselves from the controversies plaguing the banking sector and set themselves apart from their more established peers.
Dilshad Issa, personal finance expert at uSwitch.com, says: "Competition is certainly hotting up, but taking on the banking big boys won't be a walk in the park. While consumers are quick to criticise the banks, when it comes to their money there is real truth in the saying 'better the devil you know'. For better or for worse consumers know what to expect from the traditional banks and this will be a difficult barrier for any new entrant to break through.
"But while consumers are cautious they also like the idea of the competition that new banks will bring. Initially, they might not want to move their main current account to one, but they will test the water with savings accounts and credit cards so there is still everything to play for.
"The traditional banks also have some major weaknesses that new players can exploit - they are out of favour with consumers for offering poor interest rates, overcharging and penalising customer loyalty. If the new banks attack these areas by offering good rates, fair and transparent charges and ensuring they look after both new and existing customers, they could win consumers over and give the traditional banks a bloody nose."
Research carried out online with the uSwitch.com Consumer Opinion Panel in April 2010 amongst a sample of 1,543 GB adults.
1. In response to: How do you feel about new companies and organisations entering the retails banking market (i.e. Metro Bank, Tesco Bank and Virgin Money)?
2. In response to: Would you consider moving your main current account to one of these new banks in the next 12 months?
3. In response to: What do you think are the positives of these new banks?
4. In response to: What do you think are the negatives or downsides of these new banks?
5. In response to: Do you trust your bank?
6. In response to: How do you feel about the UK banking industry as a whole? 57% said 'negative' - just 8% said 'positive'.
7. In response to: Which of the following statements apply to you? Asked of those who answered 'negative' as per point 6 above.
8. In response to: Which of the following products would you consider taking out with one of these new banks?