Since buying Northern Rock last November, Virgin Money has been converting Northern Rock’s 75 branches to its own brand, with its familiar red logo. It says its aim is to bring a fresh face and some much-needed competition to the high street.
One fresh idea is its city-centre lounges, where members and their guests can relax on comfy sofas, with free Wi-Fi and refreshments, and park their kids in the play area. There are also regular community events, ranging from a Jubilee celebration to cheese and wine tastings. Lounges are now open in Norwich, Edinburgh and Manchester, with more coming soon.
Virgin says it is offering a “warm and welcoming” service to banking customers. Another new name, Metro Bank is going one step further. With the motto ‘Dogs Rule’, it invites customers to bring along their four-footed friends and provides waterbowls, biscuits and, during May, a chance for dogs to vote for their favourite treats.
Both newcomers are open seven days a week, with much longer opening hours than the established big banks.
Challenging the big banks
Last September, the Independent Commission on Banking, led by Sir John Vickers, strongly recommended just this sort of competition to shake-up the industry, and make it simpler for customers to switch their accounts.
It is sometimes worth looking beyond the best buys and looking instead for best value, looking at the all-round service
Kevin Mountford, head of banking at Money Supermarket, says: “It’s good to see these alternatives challenging the big banks, even though at the moment they are serving a small niche market, particularly Metro Bank, which is currently limited to London and the south-east.
“The trouble is that we have been living in interesting times, which has caused difficulties for new entrants. If the current economic climate hadn’t happened, I think we would have seen more new entrants coming sooner, with more innovative products. At the moment they are very constrained in what they can do.”
The result is that, going beyond the bells and whistles, the actual products on offer are unlikely to feature among the best buy tables. Virgin Money’s easy access savings account, for example, offers a rate of 2.6 per cent, well behind market leading rates of above three per cent. Metro Bank offers a paltry one per cent.
It is a similar picture with cash ISAs, where the market leaders are offering rates of 3.3 per cent or above, whereas Virgin Money’s rate is 2.85 per cent and Metro Bank is again lagging behind with 2.35 per cent.
“It is sometimes worth looking beyond the best buys and looking instead for best value, looking at the all-round service,” says Mountford. “For some people, it is worth having a lower rate in return for good service in the branch, an internet service that works and is easy to use, or being able to phone your bank and be answered straight away by a human being.”
“I think that when the economic situation improves and stability returns, we will see some banks coming out of the gates offering real innovations,” says Mountford. “More personalised banking, for example, which is tailor-made for the customer.”
If you are thinking of taking the plunge into this brave new financial world, you will be relieved to know that, as with the big banks, savings of up to £85,000 are guaranteed under the Financial Services Compensation Scheme. “Some would argue that their money is even safer,” says Mountford, “ as compared with the bad behaviour we have seen from some of the big names, these new banks still have a spotless record!”