Clare Francis: We’ve seen a number of banks change the way they structure their current accounts over the last six to 12 months, and Halifax is the latest one to announce changes. It’s launched a new account called the Reward Current Account, which offers a completely different way of rewarding people in credit and charging those who go overdrawn.
So, I’m with Mike Regnier today, who is head of banking for Halifax, just to ask him about the new account works, but also about the changes to the current account market as a whole.
Q1: So Mike, can you just explain what the new Reward Account is and how it works?
Mike Regnier: It’s a brand new current account, the reward current account which we have obviously lauched at Halifax, and it’s the first product in the market that rewards customers for trusting us with their main bank account, and they can be £60 a year better off for switching their account to Halifax.
Q2: So rather than paying a rate, an annual rate of interest on balances in credit, you’re paying a flat fee - a flat £5 a month?
MR: That’s absolutely right, we’ve abolished credit interest altogether, and there’s a very, very simple structure instead where if the customer pays in a £1,000 per month, we’ll pay them £5 each month for that.
Q3: And they don’t have to keep a £1,000 in it?
MR: No, they don’t. Even if they’re actually overdrawn, we’ll still give them that £5 a month credit, so it’s suitable for a very large number of customers. That £5 they’ll get every month - whether they’re in credit or in debit.
Q4: So presumably then those that are better off for this, are those that don’t perhaps keep high balances in their current account?
MR: Well, actually it’s suitable for everybody. The vast majority of customers in the UK, with their current account they’ll get maybe 0.1% and increasingly they won’t get anything on their credit balances that they have in their current account. If you’re on a 0.1% account, you need to keep £75,000 in your current account to be better off than being with Halifax, where we will give you a £5 credit every month.
Q5: And what about the overdraft, because you’ve changed that as well haven’t you? You’ve abolished the annual interest charge on that and are charging a daily rate?
MR: We’ve simplified the overdraft structure completely. We’ve taken away all of our fees and we’ve taken away debit interest, and instead there’s a simple daily charge for using an overdraft, so it’s very easy for customers to see how much they need to pay for borrowing from us.
Q6: Are there still fees if you go overdrawn without permission? The ‘unauthorised fees’ – do they still apply?
MR: Yes there’s a simple daily charge for customers paying both a £1 a day for using an arranged overdraft up to £2,500 – they can borrow more if they want to – and if they go over their limit, then they pay us £5 per day instead and that’s all there is. There’s no debit interest, no transaction charges, no paid items, no unpaid items – it’s a very simple proposition.
Q7: We’ve seen a number of players in the market change the way that current accounts are structured – obviously we’ve got the ongoing court case at the moment with the Office of Fair Trading (OFT) and some of the banks and building societies about whether or not unauthorised charges are fair. Is this restructuring a result of that perhaps, with the banks looking at new ways to alter the way that they do charge on current accounts? Because Alliance & Leicester operates a similar overdraft facility whereby they charge a daily rate – is the whole market changing?
MR: Well, just to be very clear, this isn’t about the court case – this is absolutely about customer demand. Customers are telling us that they want simple, very easy products to understand, where they get rewarded for trusting us with their main bank account. That’s what we’re giving them with this very simple account, and we’d urge as many people as possible to come and talk to us about it.
Q8: But do you think…it’s obviously it’s one of your current accounts at the moment, the other ones still operate in the more traditional way – do you envisage, if this proves popular, that it could be rolled out across the brand?
MR: Yes, we’ve stated that we think that simple charging structures like this are the way forward for banking, and we’ve publicly said that. We haven’t yet committed to dates as to when we’ll make changes to the rest of our customers, but we certainly believe this is a model that will work for the UK banking market, and certainly will work for Halifax and its customers.
Q9: Because it is very difficult isn’t it for people, if you are charged an annual rate for being overdrawn, to actually know how much being overdrawn by £200 actually equates to with regards to how much you’re going to have to pay for it, isn’t it?
MR: That’s exactly right, and that’s what the beauty of this is. It’s researched so well with our customers so far - they know exactly what they’ll pay, they’ll know exactly what they’ll receive as well for having their back account with us – and it’s very easy to budget on that basis, because it’s very clear and transparent and obvious.
Q10: Because obviously we’ve had the merger recently between HBoS – Halifax Bank of Scotland - and Lloyds TSB, so you’re all now part of the big Lloyds group. What does that mean for current account customers going forward, because at the moment you’re still offering accounts under the separate brands – is that going to remain the case or could we see everything merged into one brand?
MR: Well the Lloyds banking group, which now comprises the Bank of Scotland, Lloyds TSB and Halifax, has committed that we’ll keep all three of those brands on the high street going forward. I would expect to see different current accounts and different products available on each of those brands, because the brands meet very different customer needs and will continue to do so in future, so I suspect that we will continue to see very different current accounts and other products available through the different brands.
Q11: So even if the plan is to potentially roll this structure out across Halifax’s current accounts, it wouldn’t necessarily happen to the Lloyds accounts or anything like that?
MR: We’ve introduced the Reward current account for Halifax customers and also for Bank of Scotland customers, so customers in Scotland can walk into a Bank of Scotland branch today and they can have one of these current accounts. It’s not available on the Lloyds TSB brand, and the plan is that it is a Halifax and the Bank of Scotland current account.
CF: Okay, thank you very much Mike.