Bad news for savers? Experts warn Barclays’ buyout of ING Direct could limit choice

| October 9, 2012 | 0 Comments

By
Rachel Rickard Straus

10:37 EST, 9 October 2012


|

10:42 EST, 9 October 2012

Buyout: ING Direct

Buyout: ING Direct

Savers could lose out as a result of Barclay’s buyout of ING Direct UK, experts have warned.

The deal could mean fewer products for savers to choose from as ING Direct is gradually absorbed into Barclays.

ING Direct’s products regularly offer the best deals for savers, often appearing on best buy tables. The brand is credited with starting a ‘savings revolution’ nearly a decade ago with its competitive market leading deals. 

Analysts say that Barclays could use
the deal to sharpen its existing offering. The bank has agreed to honour
deals of existing ING customers, assuring them that they will enjoy at
least equivalent terms and conditions to those they currently enjoy.

However
other analysts suggest that customers may choose to go elsewhere if ING
Direct’s consistently competitive product range is simply absorbed into
that offered by Barclays.

For
example, based on someone with £1,000 to save in an easy access
account, ING Direct offers a savings account at 2.70 per cent AER
(annual equivalent rate) compared with the Barclays eSavings Reward
account which offers 1.26 per cent AER, moneysupermarket.com found.

Sylvia Waycot, spokeswoman for website Moneyfacts, said: ‘Consumers are bound to be hit by less choice… and unless Barclays offers the high rates previously enjoyed on ING accounts, the average will become the norm and the exciting will become yesterday’s dream.’

Stepping up: Some analysts say Barclays could use the deal to sharpen its existing offering

Stepping up: Some analysts say Barclays could use the deal to sharpen its existing offering

The buyout flies in the face of calls to reduce the dominance of the big five banks over fears the options available to savers and homeowners are too limited.

At the Labour party conference last month, leader Ed Miliband called for the big five banks to be pushed to sell off 1,000 branches and introduce transferable account numbers to make it easier for consumers to switch banks.

Building societies and small banks saw a rise in new customer applications following a series of scandals which hit the largest banks, such as interest rate rigging at Barclays and payment issues at Royal Bank of Scotland.

However, newcomers struggle to enter the sector, often impacted by heavy regulation and the difficult economic environment.

HSBC, Barclays, Royal Bank of Scotland, Lloyds and Santander hold 85 per cent of all personal current accounts.

Kevin Mountford, head of banking at MoneySupermarket, said: ‘ING started a savings revolution in the UK in 2003 with the launch of ING Direct, aggressively taking savings products online with market-leading deals designed to attract customers in the hope of cross-selling mortgage products, a strategy that was severely impacted by the credit crunch, resulting in a bailout by the Dutch government in 2008.

‘Barclays will be able to offer multiple products to ING Direct customers, so the deal represents a great opportunity for it to grow its business in the longer term.’

The announcement could have ‘major implications on the UK savings market’, he said.

‘Although ING Direct customers will switch over to Barclays on the same terms when the deal completes next year, there is no guarantee that they will remain on these terms in the long term, as Barclays is not known for competing for best-buy positions on savings. However, Barclays may use the deal to improve its online offering, upping the ante in the savings market in a similar way it has used the Woolwich brand for mortgages. Only time will tell.’

A Barclays spokesman said the deal is still in its early days and it will take around two years before customers are fully integrated, when they will be contacted about exactly how the changes will affect them.
 

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