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Clare Francis: Lloyds TBS, which if the planned merger with Halifax Bank of Scotland goes through will become the first 'Superbank' in the UK, is launching a new service for current account customers.
Already the countries largest current account provider, it stands to control around 30% of the market once the merger goes through, so what is this new offering and what does the future hold for people who have got a current account with Lloyds TSB or HBOS? Well I'm with Catherine McGrath today, who is director of current accounts at Lloyds to find out.
Q1: Catherine thanks for spending sometime with us. You have launched a new service which is a mobile banking service; can you just explain what it is and how it works?
Catherine McGrath: Yes, we were talking to customers and what they were saying is that they wanted to get the right information at the right time but even more importantly to be able to do something about it. So what mobile banking means is that we can send you a text that says 'you are near your account limit' or 'you're just about to go over a credit balance' - you can look at that on your mobile phone and say 'well shall I move money from my savings account to my current account' and it takes less then two minutes and you can do it anywhere you like, so its easy and simple and really hassle free.
Q2: How safe is it, because obviously there have been concerns around the security over online banking. How safe is mobile banking?
Catherine McGrath: It's really safe, so we have put it through all of our normal testing but the technology we have used is the same as the cash point machines, and secondly all you are doing is checking your own balance and moving money between your own accounts, so there is nothing risky that can happen as part of that.
Q3: So it will be very difficult for fraudsters to hack into it?
Catherine McGrath: Yes.
Q4: And who is it available to, is it available across all of your current accounts?
Catherine McGrath: It is, so for all Lloyds TSB customers with a current account, they can just go onto the website and in a few clicks just download the technology.
Q5: Lloyds obviously, this is a very much customer service offering, an enhancement that you are doing, Lloyds prides itself on customer service. You are already the countries largest current account provider, set to get even bigger post the merger with HBOS - how confident are you are that you're going to be able to maintain your current level of service and not have it compromised at all by the size?
Catherine McGrath: As you were saying service is critically important to us and we won't do things that compromise the outstanding service that our customers receive. I think the merger of the two brands is a very positive thing and we can leverage that to improve even more the service that we give our customers.
Q6: This new offering from you, the mobile banking service, comes not longer after you have launched 'Vantage' which is a high-rate 5% available on balances of between £5,000 and £7,000. What prompted you to make that change and address people who have above average balances in their current accounts?
Catherine McGrath: There were two things that really happened: firstly we noticed that customers are increasingly moving money from their current account to their savings account and back again, and they are doing that one or two times a month to try to make the most out of their money, and secondly when you do speak to customers they say 'look, a bit more of a balance builds up and the fact that high interest on a lot of accounts stops at £2,500 doesn't really do it for me'.
So, we spend a lot of time designing the product, and what was great when we spoke to customers and our staff, is even if you are on slightly lower incomes they say 'well actually I have got £2,000 sitting in X account somewhere else thats not earning me very good interest, and if I bring those balances into Lloyds I can get all of my money to work a lot harder for me and I don't have to try and move it between current accounts and savings accounts in between the month, so that is why we did it, and if you combine it with the mobile banking and the text alerts it means its even easier to make the most of your money.
Q7: And is it proving popular?
Catherine McGrath: It's great, we have had some fantastic success stories in the branches and we are having some of our best weeks of new customer acquisitions at the moment which we are delighted about.
Q8: And presumably you are attracting a certain type of customer aren't you, because it's on higher balances - is it a better quality customer?
Catherine McGrath: We are acquiring the same range that we always have done, so people look at it and say that's something I either aspire to or, so the mix of customers tends to be the same we are just getting more of them coming across the door which is great.
Q9: So its quite an interesting move you took to offer such a high rate of interest on high balances, because some of your competitors are doing the opposite and removing the interest completely on in-credit balances on current accounts - we have seen Barclays and HSBC do that in recent months. Why such opposing strategies do you think?
Catherine McGrath: Well I think the first thing for us, we believe its important to have a range of accounts that suit everybody, so for people that never keep more then £500 in their current account credit interest isn't important, and we have an account that works for them.
There is another group of customers who do have high balances and credit interest is really important to them and they say 'that's how I work out whether I am getting value for my money'. So our view is we need to have a range of current accounts, which we do, and we just didn't have one that hit the mark quite right at the high balance end which is why 'Vantage' made complete sense for us.
Q10: I know it's early days and we don't know details of the merger yet, but is it likely that Lloyds TSB and the HBOS brands will remain separate entities or are they likely to merge into one, as was the case when you merged with TSB. Are there any plans regarding that yet at the moment?
Catherine McGrath: As you have said it is really early days, and we have got some great brands in both of the portfolios with both of the banks, so no decisions have been taken on that yet but we will do what we can to make sure we maximise those brands for our customers.
Q11: And how competitive do you think the market is going to remain, because one of the things that analysts have been saying about the merger is that obviously you have been quite aggressive in the current account market, as has the HBOS group with Halifax, and Alliance and Leicester. Obviously HBOS is set to merge yourselves, Alliance and Leicester is about to be taken over by Santander which effectively going to remove potentially a lot of competition for the market, does that mean that the knock-on effect could be that things get less competitive for the customer?
Catherine McGrath: I think the current account market in the UK is one of the most competitive I have ever worked in, and I can't see that these changes are going to change that. We have had the largest share of current accounts for a while and it certainly hasn't stopped us from being very aggressive at trying to acquire other people's customers and I am sure that the other big banks will continue to try and acquire ours.
Clare Francis: Ok, Thank you Catherine.
Catherine McGrath: Thank you.