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The Post Office is piloting three new current accounts in East Anglia which it hopes will rival mainstream banking services – and revive the fortunes of struggling rural branches.
Paula Vennells, chief executive of the Post Office, with Simon Wright MP at the launch of the three new bank accounts in Norwich. Photo: Bill Smith
The accounts, in partnership with Bank of Ireland UK, were launched in 29 branches yesterday ahead of a planned national roll-out in 2014 as the business seeks to build on its high street presence as a financial services provider.
Customers will be given the choice of a Standard Account, billed as the Post Office’s “free in credit” everyday bank offering, giving customers a debit card, nationwide ATM access, and the option of online or telephone banking.
The Packaged Account offers added benefits such as travel insurance, breakdown cover and identity theft protection for a fee of £8 a month.
Meanwhile, the Control Account is designed to appeal to low-income customers who struggle to access mainstream banking.
Jean Jones, one of the first people to open a new bank account at the Post Office in Norwich. Photo: Bill Smith
Control Account holders will be asked to pay £5 a month to ensure that they do not face further banking charges when payments are returned unpaid for direct debits and standing orders.
Many of those who do not have bank accounts are thought to be deterred by the risk of such penalties, but as a result can miss out on better deals for utility payments.
The Post Office said paying such bills by direct debit could save customers on average £125 to £215 a year.
Among the first to sign up for a new account in Norwich’s Castle Mall branch yesterday were Post Office chief executive Paula Vennells and postal affairs minister Jo Swinson.
Postal services minister Jo Swinson opens a new bank account with Debbie Phipps at the Post Office in Norwich. Photo: Bill Smith
Ms Vennells said the current accounts could make it easier for people to access their money in rural communities, where 99.7pc of people are estimated to live within three miles of a Post Office branch.
As well as the convenience of branch banking, she said the new products could also generate increased income for sub-postmasters, supporting the financial future of 11,800 branches across the UK.
“The reason East Anglia has been chosen for the pilot is that it is one of the most representative regions of the UK,” she said. “You have got tiny post offices right out on the coast, and large ones like here in the Castle Mall.
“It will help in two ways. Post office will get paid for people opening accounts and they will get paid for transactions going through. It will drive additional footfall through the branch which they will not have had before.
“And because there are three accounts we have got something that will appeal to all the customers. It is fair and honest and trustworthy.”
The investment in new products comes against a recent backdrop of uncertainty and industrial action as the Post Office undergoes a process to modernise a service which is losing £40m a year.
Last week, a survey by the National Federation of SubPostmasters (NFSP) said struggling local branches are facing an “extremely uncertain future”.
Responses to 743 questionnaires revealed just 17pc of sub-postmasters said they could see a strong future for their business, and 51pc said they had seen their pay from the Post Office decrease in the past year.
And, last month, staff at Crown post office branches including Castle Mall in Norwich took strike action as part of an ongoing dispute over branch closures, job security and pay – but the chief executive stressed there were no plans to close branches.
“There is no programme of closures at all,” said Ms Vennells. “It is a programme of investment. It is all about growing the Post Office and putting in things like these new accounts which will help it to grow. The beauty of this new account is that it is transactional, and will bring new business into branches in all these locations.
“If you look at the investment we are putting in and the introduction of this new current account, we are a business on the up.”
Also visiting Norwich for yesterday’s launch was postal affairs minister Jo Swinson, who said: “This is just one way in which the Post Office is modernising to make sure it has a successful and sustainable long-term future. The government is committed to supporting the Post Office which is why we’ve committed £1.34 billion to both maintain and modernise the network, keeping post offices at the heart of local communities.
“I think a lot of people in the wake of the 2008 financial crash have looked with a degree of scepticism to the major banks, and that is understandable. The Post Office is a trusted brand and has a network of 11,800 branches which is unparalleled compared to the banks.
There are three million people using the Post Office for financial services but the one thing that is missing has been the current account. Not having that has held back the Post Office from being able to properly take those opportunities to grow.
“Particularly when a lot of high street banks are closing branches, the ability for people to access banking services in their local communities, whether it is in a big city like Norwich or a small village, is a fantastic opportunity for the Post Office and for all its customers.”
The first two customers to sign up for a new account in the Castle Mall branch were Ian Woods, a 52-year-old train conductor from Oval Avenue in Costessey, and his mother-in-law Jean Jones, 76, who lives nearby on Oval Road.
Mr Woods said he was drawn to the combination of benefits in the Packaged plan which he said were well-tailored to his lifestyle and would save him money.
Mrs Jones said convenience was the major factor in her decision to take out a Standard account. If the pilot is successfully rolled out, she will be able to do her banking close to home at the New Costessey branch – which was saved from closure following a spirited public campaign a few years ago.
“There is a post office handy to me, but if I wanted to go to a bank I would have to go to the city, so this is very convenient,” she said. “Pensioners need post offices. I don’t want to go online or do it over the telephone. You lose that contact. I like face-to-face banking.”
Norwich South MP Simon Wright, who also opened a new Post Office account yesterday, said: “The New Costessey branch was initially proposed for closure, but the community responded fantastically and rallied around to make sure they could retain that branch. Had it gone, it would have been disastrous.
“The real strength of the Post Office is its network of 11,800 branches, which means everybody has a post office no more than a few miles away, so they can make transactions on their current account easily without any fuss. We need to protect and develop the post office network so that new services like this can be offered.”
Mike O’Connor, chief executive of Consumer Focus, welcomed the entry of the Post Office into current accounts, saying it could be a “major development for the banking markets and for the future of our post office network”, particularly the Control Account.
He said: “We know that the risk of penalty charges has put off some people on low incomes opening bank accounts.
“That means they cannot benefit from direct debit rates for energy tariffs, will find it more difficult to access and manage money safely and conveniently, make payments and receive their salaries, pensions and any other social security benefits.”
Mr O’Connor added that some low-income consumers face a “poverty premium” of more than £1,000 because they cannot access better deals or manage money effectively.
The Post Office branches taking part in the account pilot include Castle Mall, Norwich; Market Place, Thetford; London Road, Lowestoft; Market Place, Diss; Quebec Street, Dereham; New Road, North Walsham; Wales Court, Downham Market; The Thoroughfare, Harleston; Norfolk Street, King’s Lynn; Aylsham Road, Norwich; and Thunder Lane, Thorpe St Andrews.