"Para Banks"

Insurance Companies and Supermarkets have no obvious connection with banking, but several have launched banking services of their own, and no doubt more will follow. We are frequently asked whether these services are better or worse than the current high street banks’ own services. This note will try to give a breakdown of our attitude.

  1. The current trend of most banks is to cut back on branch services in favour of telephone banking services and ‘electronic banking’ - which we use to include existing cash machines as well as smart cards, computer access and other forms of new technology.

  2. The banks justify and explain this move as being a response to customer demand, a way of reducing costs, and a way of improving security at branches. Whatever the justification, ‘High Street’ banks are disappearing fast.

  3. There is no real competition in banking at the moment. services offered by banks are distinguished only by being expensive, inefficient and very similar - every bank offers virtually identical services.

  4. New ‘para’ banks will offer competition and inevitably will take business away from the high street bank. This will probably force them into a more competitive attitude, but it will also reduce profits and cause more restrictions in services.

  5. If the new banks intend to ‘cherry pick’ the best and most profitable clients and leave the old fashioned banks with the complicated and difficult processes, you can expect many important services to disappear and costs to go up sharply.

  6. If the new banks genuinely will offer a full range of private and commercial banking services, they are widening the market - if not, short term savings may simply lead to long term sharp increases in banking costs for everyone. The banks may certainly justify bringing in charges on private accounts if they are losing significant business.

  7. Some new banks are backed by high street banks anyway - seeking custom through new outlets, and perhaps justifying the loss of high street branches.

  8. Some new banks are very new to this trade - make sure that you are protected if things go wrong; does your account fall within the Code of Banking Practice and the Banking Ombudsman? -New banks are likely to make some mistakes. Make sure you are not a loser if they make one on your account.

  9. Do check to find out exactly who is dealing with your personal financial affairs - you should expect that either a specialised professional department of the Supermarket will be providing this function, or a high street bank will provide the staff and expertise.

  10. Also find out where the banking facilities will be offered. We do have some concerns about the confidentiality and security of transactions conducted at a supermarket counter. Make sure that you are not overheard if you have to give password and account numbers to a member of staff on the spot or over the telephone.

NABC would be very pleased to hear about any queries and problems involving ‘new’ banks - and we will help wherever possible.

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