Private banks in the UK are facing a bigger threat than ever from high street banks that have adapted best to customer demands in the 21st century financial services market.
Research from independent market analysts Datamonitor suggests that high street banks have both the national branch networks to reach rural and ex-London wealth as well as the critical mass to ensure that they can afford to offer online banking to all customers.
High street banks also appear to be able to offer multiple products – a major advantage with depolarisation on the FSA's agenda – enabling the provision of multiple providers at a single point-of-sale. Given that they already have a large retail customer base to sell to as they rise through the wealth ladder, this makes for formidable competition for traditional private banks.
In other key product areas private banks may be failing their customers in comparison with high street banks on savings. Many private banks' savings accounts compare unfavourably with the high street by offering lower interest rates and demanding notice periods for withdrawals.
Datamonitor's research highlights the example of differences between the Bradford & Bingley Premier Saver account, which has a relatively low minimum investment (£2,000), is instant access and pays 3.15% gross interest, compared to private bank Church House's interest rate on its ཆ Day' account – 2.25% gross.
Nicholas Stephens, Datamonitor financial services analyst and author of the report, says: “High street banks pose a potent and growing threat to UK private banks, in many cases beating them on distribution and on products. Upcoming depolarisation will help the high street banks improve their product, service and distribution offerings still further.”