Consumers’ rejection of mainstream banks in the wake of trust-shredding scandals appears to be gathering pace

Barclays’ Libor mess. HSBC’s money-laundering scandal. Standard Chartered’s Iran trading. Various mis-selling episodes. It has been a bad few months for banks. Every week, it seems, brings another reason for the public to lose trust in once-respectable financial institutions. 

Trust is at an all-time low, not least in the UK. According to Edelman’s 2012 Trust Barometer, just 29% of people in the UK trust the banks. In its survey of 25 countries, only four nations had lower rates of trust. 

But will quiet anger translate into anything concrete on Britain’s high streets?

In the past, annoyance with financial providers has not necessarily led customers to switch their money away from the UK’s big five banks – HSBC, Barclays, Lloyds Banking Group, Royal Bank of Scotland and Santander. Inertia, practical obstacles, and even emotional ties, have held people back.

This time may be different. Or, at least, that is the hope of various alternative providers, who aim to ride the wave of public anger, and bring in new customers.

In July, Triodos, a Netherlands-based ethical bank, launched a web-based campaign in the UK titled “Small. The new big”, challenging individuals to make a collective difference. It noted that if every UK saver took out £10 from the big banks, that would amount to £386m in total.

“We’re trying to illustrate that if everyone does a small thing, we can make a big change,” says Huw Davies, Triodos’s UK head of personal banking.

“In the scheme of things, £386m is not a massive amount, given the size of the Big Five balance sheets. But we can only get proper change if people start to vote with their feet, and if savers moved £386m, it would get people to sit up and notice.”

Davies says people are already shifting. Triodos saw an 83% month-on-month increase in new customers in July, and a 56% jump for the first six months of the year. More than 40,000 now use its savings product (it has yet to launch a current account).

“There clearly is a movement. People are saying enough is enough and it’s time to do something. You have to assume they’ve had enough of scandal and greed, and the negative connotations with the big banks,” Davies says.

Other non-traditional banks have reported similar upswings. Move Your Money, an Occupy-inspired campaign group, says 500,000 opened accounts outside the Big Five between January and July 2012. That includes providers such as Triodos, Co-operative and Charity Bank, as well as credit unions, and building societies.

Money matters

“Customers are empowering themselves to keep banks to account through their buying power. While we welcome regulations and reforms that help to increase accountability in the financial system, we act on the premise that politicians and regulators can’t be relied upon to fix our broken banking system,” says Marloes Nicholls, co-director of Move Your Money.

Nicholls notes that the recommendations of the UK government-appointed Independent Commission on Banking may not be implemented until 2019.

However, a recent EU competition ruling, forcing Lloyds to sell off 632 branches may have a big effect on the ethical banking scene. Co-operative, which has bought the properties at a cut-down price, and which has championed ethical banking since the early 1990s, will soon have almost 10% of the UK retail market.

The question for smaller players such as Triodos is whether they become more than alternatives for people who care about environmental and social issues, and appeal to the less committed.

Davies admits: “Millions of people don’t give a damn how their money is used, don’t know there are alternatives.” But he is hoping things are changing. “There has been a movement of people already. The challenge for us is to continue to grow that momentum.”