The Independent View: The innovation revolution: How small banks and building societies are playing a significant part in creating competition through innovation.

Obama taking donations via Square mobile payment systemUp and down the country there are small but significant banks and building societies playing an important part in the day-to-day lives of customers and businesses. Yet they are not only helping customers locally, they are also changing the way we bank. The Cumberland Building Society will be familiar to Westmorland and Lonsdale’s Tim Farron MP, and despite a relatively small customer base compared to the traditional big banks, it is leading from the front when it comes to payments innovation and technology, offering more choice in the form of competitive payment services to their customers.

Late last month, the Cumberland Building Society was one of the first nine UK current account providers to offer Paym to their customers; a new secure mobile payments service that allows you to pay people directly into their account using just their mobile phone number – no need to share account numbers and sort codes. Paym not only makes it easier to pay back friends and family, but provides an additional payment option for sole traders or small businesses that have traditionally relied on cash and cheques.

The new service not only brings much valued wider competition and choice to consumers and businesses, but shows banks are taking the time to understand how customers think and what they need to improve their day-to-day banking and payments.

Innovation has helped improve choice and competition for customers in other areas too. For example the recent Current Account Switch Service, launched in September 2013, was introduced to not only speed up the switching process, but also to make changing a bank account a hassle-free and easy thing to do. The latest figures show that the switching volumes are up, but perhaps more importantly, people are increasingly aware, and confident that the switching process has improved and the barriers that have stopped customers switching in the past have been removed.

And this innovation revolution is set to expand further still, with Paym being available on more than nine out of ten current accounts by the end of 2014 as other challenger banks such as Metro head up the list of interested parties looking to join the likes of Barclays and the Cumberland Building Society in offering Paym. This is not only a good thing for customers paying back family, friends or small traders, but is good for competition in the banking sector more widely too.

This is what banking should be about; creating innovative payment services which cater for customers’ needs. Paym is yet another example of how innovation across the industry can create greater competition and choice within the banking sector which ultimately  benefits customers; whether that’s you and me, or our local tradesman.

You can find more about Paym here.

The Independent View‘ is a slot on Lib Dem Voice which allows those from beyond the party to contribute to debates we believe are of interest to LDV’s readers. Please email [email protected] if you are interested in contributing.

* Adrian Kamellard is the Chief Executive of the Payments Council

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This entry was posted in Op-eds and The Independent View.


  • Paul Reynolds 16th May '14 - 4:33am

    Very good point made by this article. Now for the next steps to increase banking competition over the whole UK… The long long awaited ‘single banking framework’ where credit unions, savings clubs and building societies can grow into larger institutions. The long long awaited changes to allow building societies to lend to small businesses. An end to price discrimination whereby small businesses are charged many times more for the same services compared with private depositors. .. and so on. Let us not be too self-congratulatory yet. ha ha. And while we are at it we might think about pressing for a full public enquiry into the 2007/8 crash now the court processes have run their course. We might start by looking at alleged undue influence and conflicts of interest in two matters -,how banks were persuaded to buy worthless assets without due diligence and with sloppy credit ratings. … and the process through which some financial institutions, knowing that they held vast positions full if worthless assets, managed to keep these facts with insiders and offload the securities to banks and employees later labelled as ‘rogue traders’. In fact some might construct a good argument that some of the gains made against JP Morgan in the latter case, for example, made their way indirectly in to the coffers of the Tory party this last quarter.

  • Yes, all good thoughts on increasing competition and innovation. DON’T FORGET Credit Unions, I use Hertsavers that is open to people who reside or work in Hertfordshire, many others around. Also Bank of Cyprus UK, FSA protected, who offer some very good ISA and savings rates of interest.

  • Michael Parsons 20th May '14 - 12:45am

    Banking competition is a non-starter as long as the [provision of banking services requires 2recvoghnised deposit taker” status – £millions capital and acceptance by the existing big banks, which jointly control the banking utilities: therefore access to ATM’s. cheque clearing, electronic payments systems, international fund transfers (courtesy USA of course) and so on. Without nationalising the utilities and giving new small start-up banks access to standard low-rate and deposit-insurance back-up any talk of bank competition is surely farcical.

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