The more banks on the market 'the better'

Having a wide range of alternatives to high street banks is a good thing for consumers, one expert has said.

According to uSwitch.com, the credit crunch has changed the banking landscape with many consumers opening current accounts with supermarket providers who already have pre-earned loyalty with customers.

Many shoppers already had a credit card or savings account with their supermarket and are now trying out other financial products, the organisation said.

Rumina Hassam, personal finance expert at comparison website uSwitch.com, explained that the run on the banks last year gave consumers a shock and made them more willing to consider smaller names.

But the expert noted that this trend is now beginning to u-turn with consumers returning to high street banks.

"However, the bank runs have allowed the less traditional banking institutions such as the supermarket banks a foot in the door and allowed them to get their products out into the market a bit more," she said.

However, results of a YouGov poll published last week found that nearly two-thirds of Brits would not consider taking out a current account or credit card from a supermarket.

When the 1,716 adults were asked whether they would bank with Tesco Personal Finance, M&S Money, Sainsbury's, ICICI, O2, B&Q and Pizza Express or their favourite charity most consumers (20.28 per cent) opted for the first choice.

Tesco Personal Finance has recently expanded the services it is offering consumers and is offering rewards on its financial products, some of which are redeemable in its superstores.

Customers with a Tesco Instant Access Savings can earn up to 1,500 Clubcard points with their account, get home insurance at half price and pet insurance for 35 per cent less.

Ms Hassam concluded that one positive factor to emerge from the credit crunch is that the wider choice in banking options has meant that current account holders can "vote with their feet".

"It is definitely a good thing for consumers simply because they can move away from places they may have banked with in the past but those traditional banks are going to try and get their customers back so that will encourage competition," she explained.

"If you have more players in the market that is always of benefit to consumers."