Does the Co-op – Lloyds deal point to a future of ethical banking? – 13110

20th July 2012

The Financial Times was unequivocal that this represents a real shift in the way Brits manage their money: "A shake-up of high-street banking has been set in motion after Lloyds Banking Group agreed to sell 630 branches to the Co-operative Group for potentially less than a quarter of their estimated value."

Lloyds' move chimes with a wider shift towards ethical banks in the wake of the Barclays scandals. Many ‘ethical' banks have reported a significant increasing in applications.

"The Co-operative Bank claims a 25% increase from last week in online applications to switch accounts. Lisa, a 33 year-old filmmaker from East London has just closed her Barclays account and moved her money to the Co-operative. She told Sky News: "I don't agree with Barclays' investments or their interest rates. They penalised me for being in debt and every time a cheque bounced they hit me with more charges. They charged me money for things which should be part of their service. They're not customer focused and they were always trying to sell me something."

But it is not just ethical banks that are winning out. More often than not people are leaving the banks because of poor service and high charges as much as ethical concerns: "Customers can also choose new brands that are trying to shake up the current account market. These include Metro Bank, which is opening branches in and around the M25, and Handelsbanken. This British subsidiary of Sweden's second-biggest bank has a network of 129 branches in Britain and is growing at the rate of two a month.

"Consumer choice will expand this autumn when Marks & Spencer launches a current account through its new M&S Bank, which will have in-store branches. Tesco Bank and Virgin Money, which has taken over the former Northern Rock branches, are also both planning to offer current accounts."

A similar picture is being seen on small business lending. Banks are being increasingly disintermediated as consumers tire of ill-considered lending criteria. The most high profile version of this has been the ‘Bank of Dave' featured in a Channel 4 documentary series: "I had to do something drastic to keep going through the recession, so I began lending my own money to my customers. Unlike the banks, I knew they were good and honest people who could be trusted. I was proven right, and it made me see just how far wrong the banks had gone."

Nevertheless, there remain those that are extremely sceptical about the move to alternative banking: Yellowbellyblues comments on "I love the notion that people think the Co-op is different to the rest. It may invest your money ethically but if you borrow money from the Co-op and you struggle to pay it back they treat you no differently to Barclays, HSBC, NatWest et al. A bank is a bank is a bank."

Despite this, many are willing to experiment with new types of banking. The poor service and low standards of the big four banks in the UK has finally compelled people to move. 


More on Mindful Money:

Do Business Schools Incubate Criminals?

How can we harness the black market?

M&S Money – banking on your account

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