As the banking crisis loomed in 2007, lines formed outside branches of the Northern Rock bank. Customers feared the bank was in trouble due to market rumours – which turned out to be correct – but the run on the bank just exacerbated the perilous state of the Rock’s cash flow crisis.
Ultimately, the British government stepped in to prevent a banking catastrophe, and before we hit the bottom of the recession, the Royal Bank of Scotland, Lloyds TSB, and HBOS had also been saved through bailouts – with the Rock – by the government.
Today things are getting better. The economy is growing again and several banks are posting good performance figures once again, but the government in the UK retains a significant share of those businesses saved from collapse, in several cases the government owns a majority share making companies like Northern Rock and Royal Bank of Scotland effectively nationalised institutions.
The government has changed since then. Gordon Brown’s Labour party did better in May 2010 than might be expected given the scale of economic collapse, but not well enough to hang on to power. The new coalition government seems likely to honour the promise given by Brown, to sell off the government stakes in these nationalised banks as soon as the economy is strong enough to support it.
That time is approaching, and it could lead to exciting times ahead for the consumer. Not only is there now a regime of regulation that means bankers need to be more transparent and to look after their customers better, this asset sale should create a huge wave of new competition on the British high street.
Retail giants Sainsbury’s and Tesco both have banking operations, Tesco run largely internally and Sainsbury’s in partnership with Lloyds banking group. Sir Richard Branson’s Virgin group has already expressed interest in taking over the whole of Northern Rock.
All these new brands will plan to setup traditional branch networks heavily focused on customer services. And all of them will be trying to create national bank networks in a very short space of time, so for those of us in the IT industry with knowledge of how banks work, it’s going to be a very exciting couple of years ahead in British banking. The high street of 2015 is going to look very different to the high street of today, and IT services is at the heart of driving this change in banking and improvement in competition and customer services.