Category: Banking


How long until we’re paying with Britcoin?

In the first week of September, El Salvador, a Central American country with a population of just under 7m and ranked 101st in the world according to GDP, created history. It became the first country to accept the cryptocurrency Bitcoin as legal tender. 

Millions of people downloaded the government’s new digital wallet which gave away $30 (£22) in Bitcoin to every citizen. Businesses became obliged to accept Bitcoin as payment. 

It now looks likely that Ukraine will follow suit, with President Volodymyr Zelensky aiming to create a ‘dual-currency’ country by the start of 2023. Zelensky is a vocal Bitcoin supporter, and intends to initially introduce Bitcoin alongside the current currency, the hryvnia, with the intention that it will eventually become the dominant means of exchange. “The people of the Ukraine are prepared for it and they expect it,” he said. 

Ukraine ranks 56th in the world by GDP: with the greatest respect, neither it nor El Salvador are major economic powers. But it now seems inevitable that other, larger economies will follow their lead and introduce a digital currency. This might be Bitcoin – but it seems increasingly likely that a digital version of their current currency will be used. 

China has already tested its digital yuan currency. Earlier this year 181,000 consumers in Suzhou City (near Shanghai) were given the yuan equivalent of £6 to spend at participating outlets in a local shopping festival. Like other consumers who have taken part in Chinese trials, all they had to do was download the Bank of China app. 

…At which point those of you with privacy concerns might start to be worried. “Does this mean the Government could track whatever I spend?” Yes – and for Governments that is one of the huge advantages of a digital currency. Imagine if digital transactions became the norm – all fully trackable and traceable. As cash is used less and less often, and is perhaps even actively discouraged, the unknown economy withers and dies. Rishi Sunak can only dream of what that might be worth to him in tax receipts.

So are we on the way to ‘Britcoin?’ Will we see a digital pound? The Chancellor has already asked the Bank of England to look at the case for a central bank-backed digital currency, allowing businesses and consumers to hold accounts directly with the bank (meaning an account would not be with say, Barclays or HSBC, but with the Bank of England). 

Such a move seems inevitable in the long run. Back in El Salvador they are “excited and worried” in equal measure by the move to Bitcoin, with many people wondering just how stable savings and/or earnings would be in such a notoriously volatile currency. 

Presumably central bank-backed digital currencies like ‘Britcoin’ and the digital yuan would alleviate such worries, but you do wonder how long it would take for another, ‘unofficial’ currency to become established. There will always be people who would rather their transactions weren’t tracked by the authorities.


Where will high street banks be in 10 years?

You will likely have grown up knowing the ‘big four’ banks and their presence on every high street. Barclays, NatWest, Lloyds and HSBC (which you may remember as Midland Bank) were prominent in almost every town. If you needed a loan – especially if it was for business purposes – then your first port of call was the bank manager.

Gradually, the image of the ‘big four’ began to slip. They were beset by scandals, notably the PPI (Payment Protection Insurance) mis-selling scandal. According to an article published in FT Adviser in August 2019 the scandal will have cost the industry £50bn, with Lloyds the biggest culprit having – at that time – paid just over £20bn in compensation. To put that figure in perspective, the market capitalisation of Manchester United, the UK’s biggest and best-known football club, is around $2.5bn (£1.77bn) at the time of writing – making the PPI compensation bill 28 times the value of Manchester United.

So not surprisingly, public faith in the banks was starting to wear a little thin. What has really threatened the “old” banks, though, is the rise and rise of fintech (financial technology).

Many people will have heard of the so-called ‘challenger banks’ such as Monzo, Metro, Revolut and Starling. The millennial generation (roughly, the generation that came of age around the turn of the century) and Generation Z (the generation after millennials) have very quickly taken to fintech, using the various apps for transferring money, investing and saving and everyday banking. We’re now seeing the start-ups going mainstream, with Starling Bank advertising its business account on TV.

But perhaps the most compelling evidence is anecdotal. You talk to so many people now who say they simply cannot remember the last time they went into a bank branch. So what will we see in ten years’ time?

A huge reduction in bank branches is almost certain. While that may cause problems for town centres already suffering from shop closures, it is hard to see any alternative. Bank branches are expensive to maintain and they demand something that is even more costly than bricks and mortar – people!

Will this cause problems for some groups of people – the elderly, for example, who are disproportionately reliant on cash? Possibly – but while the UK may be lagging behind Sweden who are on course to be a cashless society by 2023, it seems inevitable that we will use less and less cash in the future.

Fintech will continue its inevitable rise. There will be more challenger banks, and you suspect they will increasingly define their target markets – business lending, for example, and specialise in them.

And those expensive people? Sadly, they are going to be needed less and less. Looking into the crystal ball it seems inevitable that if you are dealing with a ‘bank manager’ they will be online, on your phone or on your wrist and making lending decisions based on artificial intelligence and machine learning.


Could the UK have it’s own digital currency?

At a seminar in March, Haruhiko Kuroda, Governor of the Bank of Japan, suggested that the central bank should immediately start “preparing thoroughly” for a future with its own cryptocurrency.

While there were no immediate plans to introduce a cryptocurrency Kuroda stressed the importance of being ‘thoroughly prepared’ should the need arise. 

In April it was the Bank of England’s turn. Together with the Treasury they announced the preparation of a taskforce to explore the possibility of a central bank-backed digital currency. The aim is to look at the risks and opportunities involved in creating a new kind of digital money, which would exist alongside cash and bank deposits. 

Could – to use Harold Wilson’s famous phrase – ‘the pound in your pocket’ become the pound on your phone? More importantly, could it one day be the pound only on your phone? Is this the first step towards cash being eliminated – the step towards a fully trackable, fully traceable digital economy? 

It may be best to take a step back, and look at exactly what a digital – or crypto – currency is. In its simplest terms, a cryptocurrency is one secured by cryptography, making it impossible to counterfeit. It is based on sophisticated blockchain technology and spread over a network of computers. You may have heard of Bitcoin, the most well-known of the many cryptocurrencies that now exist. 

Unquestionably, Bitcoin is becoming increasingly widely accepted, with Tesla now using it as payment for their cars. So far, though, a key feature of cryptocurrencies is that they have not been controlled by central banks and have, therefore, remained free of political interference or manipulation.

Could that be about to change? Could the UK be about to go down the same route as Sweden, which is on course to become the world’s first cashless society from 2023? There are obvious drawbacks and risks. Many people might struggle to adapt. In recent years we have seen the damage that cyber attacks can do to companies and organisations. Could a nation’s currency fall foul to attacks of a similar nature?

For central banks however there are also obvious benefits. Moving money becomes faster. Cash transactions, which previously may have taken place under the table, could bring in a huge rise in tax revenue. Transactions become traceable, meaning that crimes such as money laundering would – in theory – become more difficult. 

The Bank of England’s task force will take some time to report – but cryptocurrencies have momentum and it is certainly an interesting space to see develop.


Cash is on the decline in the UK

Is cash still king? As contactless payment options have grown dramatically in availability and popularity in recent years, we have seen a reduction in the use of cash as a result. While there has been a steady decline in cash withdrawals, and the use of cash transactions in general was to be expected as new technology becomes more widespread, the unprecedented events of 2020 have resulted in a marked acceleration in this decline. The UK in particular provides a stark example of this trend, with the use of cash declining faster than the European average.

Where did the decline begin?

According to the banking trade body, UK Finance, debit card payments overtook cash payments for the first time in the UK in 2017. This moment was indicative of a wider trend, with cash payments falling steadily since 2012 and debit card payments rising at a similar rate. Contactless payments, too, have seen a steady increase in their usage since their introduction in 2007. They broke the £1bn in annual transactions landmark in 2013, seeing a further boost in 2014 when Transport For London introduced Oyster card readers that accept contactless bank cards. By 2018, over 60% of people over the age of 65 were reported to use contactless payments, which is a considerable number of the, historically, least tech-savvy portion of society. In the last three years alone, cash usage has effectively halved. In September 2017, there were 170 million withdrawals from cash machines; in September 2020, there were just 88 million. 

That is all to say, the decline in cash withdrawals and transactions, and particularly relative to the use of other forms of payment, comes as no surprise. The speed at which that decline has accelerated, however, is something of note.

Covid Acceleration

The data from Link, who operate the largest network of free-to-use ATMs in the UK, suggests that weekly ATM withdrawals since the first lockdown was lifted are a third lower than they were before the lockdown began. Accenture has reported that between 17th and 25th March 2020, cash usage in the UK declined by 50%. The report has forecast that across the whole of 2020, compared to 2019, the decline will look more like 40%. With the rest of Europe forecast to see a 30% decline in cash usage, that’s a considerable number. That reduction may well be here to stay. As consumers change their behaviours, and opt to avoid handling cash to avoid physical interaction with others throughout the pandemic, they may not return to older habits as time goes on. Time will tell what lasting impact the pandemic has on the UK’s preferred methods of transaction, but as it stands, the future looks largely cashless.


What does the governor of the Bank of England do?

With the 121st governor of the Bank of England, Andrew Bailey, set to take over on 16th March this year, we wanted to take a look at one of the UK’s oldest institutions and its figurehead. 

What is the Bank of England? 

The Bank of England is the UK’s central bank. It produces all the banknotes used in the UK and houses the UK’s gold reserves (a total of 400,000 bars worth over £200bn).

Founded in 1694 to act as banker to the government, the first ever governor was John Houblon – you may have seen his face on a £50 note between 1994 and 2014. The Bank was owned privately until the end of the Second World War, when it was nationalised by the government. 

How long can you be governor for? 

Officially, a governor has a term time of eight years. However, the 120th governor, Mark Carney, agreed to a five-year term with the option of an additional three years. He then agreed to extend his term twice, staying on longer due to delays caused by Brexit. 

What does the governor do?

The governor will represent the UK in meetings with international bodies such as the G7 or the International Monetary Fund, while also chairing important internal committees such as the Monetary Policy Committee and the Prudential Monetary Fund. In addition to this, he is tasked with overseeing the Bank of England’s three main responsibilities:

  • The Financial system: This is the system that connects people who want to save, invest or borrow money. The Bank of England monitors any risks within the system and tries to mitigate them – such as loaning to banks when necessary. It shares this responsibility with the Treasury and the Financial Conduct Authority.  
  • Individual banks: The Bank of England ensures that individual banks, insurers and building societies are of a suitable standard and are being run well.  
  • Inflation: The Bank of England tries to keep the cost of living as stable as possible by setting monthly interest rates and making sure that prices rise within the current target of 2% per year.

Have you got what it takes? 

When Philip Hammond first put up the job advertisement for the role of governor in 2019, the description said that the successful candidate should have experience of being at the helm of a large financial organisation, good communication skills and “acute political sensitivity and awareness”.  If that sounds like you, in eight years time there may be a £495,000 a year job opportunity for you. 


What is the open banking revolution?

Over a year and a half ago, a digital revolution introduced a new way for people to handle their money: open banking. All of a sudden at the touch of a button, you could compare household bills, control direct debts and track payments across each of your bank accounts.

Consumers can now provide their consent to allow for financial transaction data to be accessed without requiring them to give their personal login credentials to a third party. The government backed the new development with the aim of bringing more competition to the marketplace.

Specifically, the law requires UK banks to share their current account holder data through application programming interfaces (APIs). APIs are an integration technology that allows for different forms of software to communicate effectively with one another. They have a plethora of benefits and can be utilised in a number of valuable ways. In the finance sector, the main focus is on providing consumers with products better suited to their individual needs.

However, despite the initial buzz during the launch, public awareness has remained relatively low. According to a survey conducted by banking software developer Splendid Unlimited, only one in four people had heard of open banking in 2018 and one in five people who had heard of open banking said they knew what it actually was.

What’s out there?

Countless apps exist that can revolutionise the way we deal with our finances. Most high street banks now have apps that enable you to view all your accounts in one place, HSBC even goes a step further with their Connected Money app, which allows their customers to include the accounts they’ve opened with competitors in order to create a more convenient overall picture of their finances. There are also third party apps such as Yolt that give you oversights into your ingoings and outgoing while other apps like Bean enable you to compare deals on household bills, cancel subscriptions and track payments across all of your accounts.

There are apps for debt management, investment, retirement, credit analysis and more. Open banking can be seen to be fully embracing Apple’s famous 2009 slogan: ‘There’s an app for that.’

Risky business

According to research conducted by PwC, over 64% of adults are expected to have signed up to open banking driven services by 2022. However the research found that customers are slow to adopt due to concerns over companies they aren’t familiar with having access to their personal financial details.

Open banking came at a time when banks were becoming synonymous with poor digital security. Though many open banking supporters are seeking to dispel these concerns by maintaining data security.

Experts have determined that if open banking provides returns on investment, maintains trust and continues to respect the data of its users, then the mass adoption of budgeting apps and digital money assistants may happen sooner than we think.

Though the industry may be seen to be still finding its feet, if customers are educated on the safety of their data and the value open banking provides, banks and app providers may be able to build that vital trust that pushes the open banking revolution into the next stage.


who owns your bank?

Following the financial crisis of 2008 when a number of big British banks came close to collapsing, the Financial Services Compensation Scheme (FSCS) was strengthened by the government. As such, the FSCS 100% guarantees the first £85,000 of a person’s cash savings per banking licence in total, including interest. This means that a couple with a joint account holding up to £170,000 will have every penny of this covered.

But what does ‘per banking licence’ mean? Simply put, one banking licence can cover a number of different banks, building societies or brands. It’s important therefore to spread your cash across more than one provider, as it could mean some of your hard-earned money isn’t as safe as you think in the event of a future collapse.

With that in mind, below is a list of the biggest banks and building societies in the UK and all the brands which fall under their banking licence. That means if you hold more than £85,000 across different brands but under the same licence, you could be in a position to lose out should the worst happen.

HBOS (Halifax/Bank of Scotland group):
Bank of Scotland
Birmingham Midshires
Intelligent Finance

Lloyds Banking Group*:
Cheltenham and Gloucester
Lloyds Bank

*HBOS was acquired by Lloyds Bank, but both HBOS and Lloyds Banking Group have continued to operate under separate banking licences.


Barclays Direct (formerly ING Direct)
Standard Life

First Direct

Royal Bank of Scotland (RBS)**:


Ulster Bank:
Ulster Bank

Coutts & Co:

**NatWest, Ulster Bank and Coutts are all subsidiaries of RBS, but have their own separate banking licences. As such, someone with accounts in each of these banks would be covered for up to £85,000 in each bank.

Santander UK:

The Co-operative Bank:
Britannia BS
The Co-operative Bank

Bank of Ireland UK:
Bank of Ireland UK
Post Office

Clydesdale Bank PLC:
Clydesdale Bank
Yorkshire Bank

Sainsbury’s Bank:
Sainsbury’s Bank

Tesco Bank:
Tesco Bank

Virgin Money:
Virgin Money

Nationwide BS:
Cheshire BS
Derbyshire BS
Dunfermline BS
Nationwide BS

Yorkshire BS:
Barnsley BS
Chelsea BS
Norwich and Peterborough BS
Yorkshire BS

Coventry BS:
Coventry BS
Stroud and Swindon BS

Skipton BS:
Chesham BS (renamed Skipton BS)
Scarborough BS (renamed Skipton BS)
Skipton BS

So, what about banks outside the UK? Whilst most banks which accept British savings are not covered by the FSCS, some within the European Economic Area are covered by their home country’s compensation scheme through the ‘savings passport’ scheme. One of the most prominent examples is Triodos Bank in the Netherlands, which is covered by the Dutch equivalent of the FSCS up to €100,000 per person. There are also some international banks which are covered by the FSCS, including:

Axis Bank UK
State Bank of India UK

Money saved in accounts and products offered by Government-backed National Savings & Investments (NS&I) enjoys 100% security (although these products are not protected by the FSCS). This includes premium bonds.


The end of (some) £50 notes: time to unstuff the mattress?

Hopefully you don’t keep all of your savings stuffed in or under the mattress of your bed but if you do happen to keep a ‘rainy day’ store of £50 notes, you had better check your bed linen, otherwise you may find that the value of your assets suddenly goes down in the not too distant future!

The Bank of England has announced that the £50 banknote carrying the portrait of Sir John Houblon, the first Governor of the Bank of England, will be withdrawn from circulation on 30 April 2014. From that time, only the £50 notes featuring Matthew Boulton and James Watt, which was introduced in November 2011, will hold legal tender status. Members of the public who have Houblon £50 notes can continue to use them up to and including 30 April.

After 30 April, retailers are unlikely to accept the Houblon notes as payment. However, most banks and building societies will continue to accept them for deposit to customer accounts. Agreeing to exchange the notes after 30 April is at the discretion of individual institutions. Barclays, NatWest, RBS, Ulster Bank and the Post Office have all agreed to exchange Houblon £50 notes for members of the public – up to the value of £200, but only until 30 October 2014.

The Bank of England will continue to exchange Houblon £50 notes after 30 April, as it would for any other Bank of England note which no longer has legal tender status. So if you forget to check your mattress, you can still pack your £50 Houblon notes in a case and take a trip to the Bank of England!



building your financial future

‘A deeply flawed culture’

This is how one Sunday newspaper, in the middle of January 2013, described the culture inside Barclays Wealth, a phrase repeated across the media, as observers and commentators watched events unfold at Barclays Bank as it sought to encourage a perception of being a sound and trusted institution in the banking world.

The reported behaviours inside Barclays Wealth have prompted us on the outside to think about the issues being reported:

‘Is this how all banks behave? If there is so much  money in the banking system, why can’t I get a loan for my business? Why are the interest rates on my savings so low? Is this industry regulated?’

Add to this the reported pay and bonuses for senior people in Barclays Wealth and some of us outsiders begin to get a bit angry! One argument that we hear from insiders and the Government is that the banks are an essential part of UK wealth creation and a healthy and vibrant banking sector is important to the UK, to maintain our leading place within the world finance systems.

These assertions lead the outsider to ask, ’who is getting the wealth being created? It’s certainly not me!’ Now of course, as outsiders, we’re simply told that we don’t understand the complexity of the international money markets and how they work, and we should also remember that the wealth of our pension funds depends upon the success of our investment banking sector.

A week later, the weekend papers warn us that our pension funds might crash soon and we will get a lot less than we expect. Is this because the investment banks and their play makers are going to have less freedom to bend rules and fiddle systems, like adjusting the Libor rate?

Most of us, over the years, have known our banks as institutions, defined in dictionary terms as established organisations or bodies – objects familiar to us with established practices. Not ‘regimes of fear and deceit’, as one major bank was described in the press last week.

We need our institutions like hospitals, schools and universities to be familiar and reliable, to have places in our lives that we can trust and depend upon. On the whole we see them as institutions rather than businesses. Banks, on the other hand, are clearly ‘for-profit’ businesses and we should not be surprised to see reported that in at least one major bank the ‘executives were actively hostile to banking rules’ and that they pursued ‘revenue, growth and profit at all costs’. This banking culture is not that of the ‘high street bank’ we would like to be familiar with as an institution.

If such reported culture and behaviours are symptomatic of a changing culture and values in our UK society as a whole, then we may need to be very careful how we welcome the ideas that our schools, hospitals and universities should become more business-like, and think again about whether parliament is still an institution or indeed, has it too become a business?



building your financial future

Banking Standards under scrutiny

The Parliamentary Commission on Banking Standards was established in July 2012, to consider and report on the professional standards and culture of the UK banking sector, taking account of regulatory and competition investigations into the LIBOR rate-setting process, and lessons to be learned about corporate governance, transparency and conflicts of interest. The Commission will report on implications for banking sector regulation and for Government policy and make recommendations for legislative and other action, with a deadline to complete its deliberations by 18 December 2012.

The Commission has made an initial call for evidence from the banking sector and other interested parties, to be received by Friday 24 August. Other requests for written evidence are likely to follow as the Commission’s work develops. The initial questions posed, seeking evidence of culture and practice, include:

1. To what extent are professional standards in UK banking absent or defective? How does this compare to (a) other leading markets (b) other professions and (c) the historic experience of the UK and its place in global markets?

2. What have been the consequences of the above for (a) consumers, both retail and wholesale, and (b) the economy as a whole?

3. What have been the consequences of any problems identified in Question One for public trust in, and expectation of, the banking sector?

4. What caused any problems in banking standards identified in Question One? Here the Commission identifies a considerable number of themes that respondents should consider, including: risk taking; globalisation; remuneration levels; corporate governance; corporate structure; regulation and compliance; culture and accountability and the corporate legal framework and criminal law.

5. What can and should be done to address any weaknesses identified? To what extent are such weaknesses subject to remedial corporate, regulatory or legislative action, domestically or internationally?

6. Are the changes already proposed by (a) the Government, (b) regulators and (c) the industry, sufficient?

7. What other matters should this Commission take into account?

Despite challenges by opposition politicians and some industry voices, the brief of the Commission seems to be comprehensive. Early impressions are that the banking industry is keen to contribute to ‘setting the record straight and starting afresh’.  The acid test will be what the Government, institutions and regulatory bodies do with the Commission’s findings and recommendations to restore public trust and confidence in the banking sector.