A great day for all bank customers

by Ed Bowsher on 14 December 2011  |  3 comments
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Lloyds has entered exclusive talks with Co-op to sell 632 branches. This should boost competition in the UK market and is good news for all of us.

I’m delighted that Lloyds has chosen Co-op as the ‘preferred buyer’ for 632 branches. The EU has told Lloyds that it must sell these branches by November 2013 and I can’t think of a better buyer. 

That’s because the Co-op is a mutual business. It’s owned by its customers rather than fund managers in the City. That means it’s less likely to take foolhardy risks with its customers’ money. Co-op also offers decent products and has a good reputation for customer service. 

Assuming the purchase goes through, Co-op will buy all branches with the Cheltenham & Gloucester brand as well as all Lloyds TSB branches in Scotland. Co-op will also acquire some Lloyds TSB branches in England and Wales. 

Co-op is already looking at opening more bank branches in Co-op supermarkets, so it’s set to become a much bigger force in UK banking. That should deliver a significant boost to competition in the UK banking market. 

What’s more, Co-op won’t be shaking up the market on its own. Virgin Money bought Northern Rock last month and Tesco Bank is set to launch its own current account next year. The likes of Barclays and Lloyds could feel some real pressure next year and that should encourage them to offer better products and improve customer service. 

That said, we won’t get the full benefit of competition if customers aren’t prepared to switch current account. If the traditional ‘big four’ banks know that most people won’t switch, they won’t have an incentive to improve their offering. 

In fact, there are some great accounts that you could switch to right now. I particularly like the First Direct 1st Account. 

First Direct was the ‘most loved’ current account provider in the 2011 lovemoney.com personal finance awards, and that was mainly because First Direct is so strong when it comes to customer service. (You’ll also get a £100 reward if you switch to First Direct but you do need to pay £1500 a month into the account.) 

Interestingly, Co-op was joint second in the current account section of our awards which just strengthens my belief that it will become a significant player. 

So it’s up to you. Switching current account won’t just help you. It will also help lazy non-switchers by forcing the big banks to raise their game. Go for it! 

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