Alex Gowar from leading p2p finance website RateSetter.com explains how consumers are waking up to the alternatives to traditional banking:

Another week, another blow for UK Savers. If it’s not a major banking scandal, it’s an announcement from the Bank of England that interest rates will remain at the current historic low of 0.5%. This week, data from MoneyFacts.co.uk showed that just 1 in 5 high street savings accounts will cover the costs of inflation. No wonder so few households even bother to save.

Looking through the MoveYourMoney blog I can see that I’m not alone in believing that consumer trust and confidence in traditional banking is currently being severely tested. In this context, it is perhaps unsurprising that we find ourselves in the midst of a personal finance revolution where consumers are increasingly on the lookout for viable alternatives to traditional high street banks, which show no interest in offering value.

At the heart of this revolution is peer-to-peer finance. For the uninitiated, peer-to-peer lending is simply banking without bankers: operators provide a marketplace in which consumer borrowers are matched up directly with savers looking for a better deal. Although peer-to-peer has been around since 2006, the last year has seen huge adoption as borrowers and savers increasingly hunt for better deals. This is recognition that there are credible alternatives available to savers that offer safe and highly competitive returns on hard earned cash. At RateSetter.com, savers can lend for as little as one month at an AER of 3.3%, up to a “5 Year Income” returning 7.2% after fees.

The thorn in peer-to-peer’s side has always been defaults– what happens if the person I am lending my money to cannot repay? The three main providers, RateSetter.com, Zopa and Funding Circle, have approached the issue of bad debt from different angles, though all undertake similar stringent credit checks to ensure only worthy borrowers are approved. RateSetter believes it has cracked the nut of bad debt via a unique ‘Provision Fund’. The Provision Fund is a pool of money from borrower fees which compensates lenders should a late payment, or default, occur. It gives legitimacy to RateSetter’s claim of being the simplest and safest peer-to-peer operator: in fact, RateSetter is the only peer-to-peer operator in the world to justifiably claim that every single lender has received every penny of capital and interest.

Commitment to protecting Savers is what led RateSetter, along with Zopa and Funding Circle to establish the P2P Finance Association. This self-regulatory trade body aims to protect consumers by promoting best practice within the sector. These guidelines can help forge a path to new regulation governing the sector, an issue that needs to be addressed if current growth continues. And there’s no reason to suggest that growth should slow, as economic commentators have recently been far more vocal in talking up peer-to-peer as an alternative to traditional banking systems. Indeed, Director of Financial Stability at the Bank of England Andy Haldane recently suggested that peer-to-peer finance companies could one day disrupt high street banks in the same way as the Googles of the world have changed the face of retail. 

Will grand statements like these worry the big boys of banking? Probably not, they’ve got a lot on their plate at the moment. But in many ways peer-to-peer represents a return to old fashioned principles of banking that seem to have gone awry in recent years: a prudent approach to risk, putting customers first, and delivering great value. Food, perhaps, for thought.

The FSA report out yesterday revealed the role of commission-based sales in driving the aggressive sales culture that has contributed to the recent slew of mis-selling scandals such as PPI and interest rate swaps.

It's clear that if you pay bank workers a pittance, forcing them to top up their salaries with commissions, than customers are going to suffer. Martin Wheatley, FSA managing director, told the BBC that some incentive schemes seemed "guaranteed to give the wrong outcome for the customer".

Lloyds banking group, where up to 40% of staff received bonuses for selling extra products to customers, have been referred to the Enforcement and Financial Crime Division.

 J C Willis, a former HBOS worker, said of his experience working on the cut throat sales floor:

'Front line staff complained about the sales culture. They tried to tell senior managers that the targets were too high, their jobs were too stressful and the lack of focus on service was driving good customers away. Everything we said fell on deaf ears.' 

While we welcome the action to 'clamp down' on this behaviour from the FSA, we’ve seen banks wriggle around regulation too many times. We need a fundamental shift in the culture of our banks, and an engaged customer base that holds them to account.

 It’s time to change banks.

What a great day for Building Societies, with new research from the BSA showing both lending activity and deposits going up, and a considerable jump in customer service ratings across the mutual sector.

The BSA says “In just three months, consumer views of the service they receive from banks and building societies have swung markedly in favour of building societies and other mutual lenders and deposit takers.”

A new question concerning ethics found 62% of customers agreed that mutuals had high ethical standards, and the leap ahead of plc banks on all customer service factors has been marked.

Hilary McVitty says of the last three months “We were rather taken aback by the degree of movement.  Strong feelings are clearly being expressed here by consumers.”

With the scandals engulfing our big banks these last few months – from computer meltdown to Libor to misselling PPI to laundering money to drugs cartels and terrorists – we can’t say we’re surprised!

For many people, the recent run of scandals has been the final straw for their relationship with the big banks, and we’ve seen a huge wave of customers moving their money.

Adrian Coles, Director-General of the Building Societies Association, says “Mutuals are currently enjoying a sustained increase in lending activity, and an increase in deposits from savers.”

During a month where bank lending fell by 9%, gross lending by mutuals rose by 44%. This follows a strong year on year trend, and takes market share of mutuals up to 24%.

Go the mutuals!

Barclays under investigation by Serious Fraud Office over payments to Qatar sovereign wealth fund

The serious fraud office has confirmed that it has opened investigations concerning payments from Barclays to the Qatari Sovereign Wealth Fund the bank turned to in 2008 to avoid being bailed out by the UK taxpayer.

Danni Paffard, spokesperson for Move Your Money UK said:

"Barclays have been at the forefront of every scandal from PPI, to Libor, to the unrelenting bonus culture. Amidst this, Bob Diamond has stood in front of the Parliamentary Committee and defended the strength and integrity of the bank through its ability to raise money through Qatari wealth funds, instead of taking a taxpayer bailout.

Now these very same transactions are being investigated by the Serious Fraud Office, the banks integrity is again under question. As Barclays continues to ride rough shod over the law, disgruntled customers need to say 'enough is enough' to the worst of the British Banks."

It's time to move your money - and now there's an app to help you! Thanks to Co-operatives UK new app 'Co-operate' you can find co-operatives and mutuals near you. 

Find the local credit union, co-operative and mutual bank to you, take part in this months challenge and get your money moving today!

The Co-operate app makes it easy for you to find co-operative and mutuals across the UK. Whether you need food or phones, electricity or banking. Co-operate allows you to download a better world to your mobile phone.

Download Co-operate on iPhone or Android, for free, to find your local credit union,  co-operative or mutual banks and take part in this month's challenge. When the challenge is met then rewards will be released to the device used to complete the challenge.

The Move Your Money Challenge

Unlock co-operative vouchers in three simple steps:

1. Find your local credit union, Co-operative Bank or building society using Co-operate

2. Check-in to as many credit unions, Co-operative Banks or building societies using Co-operate as you can

3. Share the challenge and work together to achieve monthly targets and release awards

Each month there will be a cumulative target umber of ‘check-ins’ to reach. Users are encouraged to share the challenge and raise awareness so they hit the target sooner.

The challenge will run until the 15 September, so ensure you check-in to as many co-operatives featured on Co-operate to unlock your vouchers! For more details download Co-operate.