PERSONAL ACCOUNT

Size isn’t everything when it comes to finding a better bank

It’s been a terrible week for TSB customers. In the words of Nicky Morgan, chair of the Treasury Select Committee, writing to the bank to demand an explanation of its disastrous computer system failure, “it simply isn’t good enough”.

Behind this particular scandal lies a far wider problem. And also an opportunity. Because for those willing to switch to a smaller provider, today’s market is packed with innovative banking options that offer improved terms. Smart consumers seeking the best place for their money should consider them seriously.

For modern banks, small can be beautiful. Part of the reason is technical. As Ms Morgan’s letter also said, “this is yet another addition to the litany of failures of banking IT systems”. Large and long-standing providers come with giant, tangled legacy computer systems. These can be less reliable than new products built for the digital age.

Since it was spun out of Lloyds Banking Group in 2013, TSB was supposed to be different. It has tried to position itself as an innovator. But this week’s chaos shows how hard that is to deliver. Technology is not the only problem. In an effort to mollify customers, TSB is boosting the interest rate on its Classic Plus current account back to an impressive 5pc. But it cut this rate, available only on balances up to £1,500, to 3pc two years ago.

As a rule of thumb, bigger banks don’t offer the best deals. Better interest rates and customer service and longer branch opening hours can all be found among small players willing to fight harder to win your business.

Too often, financial services customers have their loyalty rewarded with charges that rise year after year or with rock-bottom interest rates. Familiarity breeds a level of customer service sometimes indistinguishable from contempt.

You don’t have to put up with such a bad deal. Amounts up to £85,000 are protected in any bank account backed by the Financial Services Compensation Scheme (FSCS), and some of the newest providers around are signed up. For example, your money is FSCS-protected whether lodged with the mobile-only banks Monzo and Starling or with a more familiar name. And the new providers shouldn’t suffer from the same legacy IT problems.

Moving to a better bank account is also far easier than it used to be. The introduction of the current account switching service in 2013 means that your regular payments and payee details can be switched across to a new provider seamlessly.

First Direct even offers inventive rewards for doing so, as today’s front page shows. For those who prefer to bank in person, Metro Bank is worth considering. It has only 50 or so branches, mostly in the South East, but if you do have one near you it offers exceptionally convenient opening hours.

And if you are looking for a better interest rate on your savings, the To keep financial firms on their toes, customers have to be willing to vote with their feet. But it’s also important to reward excellence, and this weekend you can help us to do that by voting in the Consumer Investment Awards.

In search of better feedback from the users of investment and pension providers, has partnered with the straight-talking financial information website Boring Money. We’ve drawn up our shortlists and identified key categories. Now we need to know what you think.

Which firms write to you in plain English? Whose customer service hits the mark? Who offers real value for money?

Voting closes at the end of this weekend, so please let us know what you think today.

Find out more and have your say by visiting our website and taking the Consumer Investment Awards survey:

Small can be beautiful in banking, as well as nature