JEFF PRESTRIDGE: Current account challenge scares smug big banks

It is good to see that the stranglehold applied by the big banks - Barclays, HSBC, Lloyds and Royal Bank of Scotland – to the current account market is slowly being loosened.

Nationwide Building Society, one of the few financial institutions to keep its solid reputation intact since the dark days of the financial crisis, reported last week an 18 per cent increase in the number of current accounts opened in the year to April 4 this year (its financial year).

It means it now has a meaningful 6.2 per cent share of the overall market. In March alone, it attracted one in ten of all those moving their current accounts.

Increasing share of the market: Nationwide's success has nothing to do with mutuality, whatever chief executive Graham Beale (paid a mega plc-like salary) may say

Increasing share of the market: Nationwide's success has nothing to do with mutuality, whatever chief executive Graham Beale (paid a mega plc-like salary) may say

Nationwide’s success has nothing to do with mutuality, whatever chief executive Graham Beale (paid a mega plc-like salary) may say.

It reflects other factors at play. First, Nationwide has been prepared to pay over the odds to attract new business as evidenced by the 5 per cent interest on the FlexDirect account. How sustainable this offer is remains to be seen. The more successful Nationwide is in attracting new business, the more costly the premium interest rate becomes and the more tempting it will be for Beale to pull the plug.

Second,  like other challenger banks (such as Metro Bank and M&S Bank), Nationwide is benefiting from the investment it has made in customer service.

Fairer Finance, a website set up by ex-Which? money expert James Daley, rates it the number one provider of ‘good value’ current accounts based on a mix of criteria – the happiness of customers, the sensitivity of its complaints handling and how upfront and honest it is as a business. The result is that existing customers tend to recommend it to others.


Nationwide’s success is also a triumph for the current account switch service introduced by the Payments Council last September to stimulate greater competition.

With the guarantees that underpin this service – switching within seven working days and automatic transfer of direct debits – customers can now move without fear that chaos will ensue.

For those considering switching to a brave new banking world, a look at the Payments Council’s website will reap dividends.

Nationwide is not the only institution prepared to pay 5 per cent interest (with caveats, of course). Betting giant Ladbrokes has launched a retail bond paying 5.125 per cent interest a year, with payments – made half-yearly – commencing in September and running until September 2022 when the bond matures.

Unlike some other bonds recently offered by British companies large and small, Ladbrokes’ 5.125 per cent sterling bonds are tantalising. For a start, they can be traded, which means you don’t have to hold them until maturity.

Also, they can be held inside an Isa, protecting interest payments from tax. Minimum investment in the offer period, which ends a week on Tuesday, is also a modest £2,000.

For savers in search of income and prepared to look outside bank and building society deposit accounts, the bonds should appeal. Of course, inflation and interest rate rises in the wider economy could diminish their attractiveness but they are a much better prospect than a flutter on one of the bookie’s fixed-odds betting terminals.

Talking of flutters, Premium Bond fans will be delighted with the news that from today the maximum holding rises by £10,000 to £40,000. Bonds bought this month will go into the August draw when the number of £1million prizes goes up from one to two. Bonds can be bought online, via a direct transfer from your bank account or at a post office (if it’s still open). Although the effective annual return is hardly irresistible at 1.3 per cent, many of the 600,000 customers with £30,000 holdings will top up, tempted by the tax-free prizes on offer and a stab at winning one of the jackpots.

Many readers have received letters from Who4 Limited, telling them they will be refunded the fee they paid when they used its website taxreturngateway to process their self-assessment tax return.

This is after they complained they were bamboozled into paying the fee, which in some cases was £1,000.

Unfortunately, although promising payments within seven to ten days, few refunds have so far been made – and readers quite rightly are concerned, especially since the phone number provided on correspondence does not work. I hope Who4 will be true to its word and pay out to all those it has written to.