Big high street banks are not the only option available

Vera Cottrell of consumer group Which? said: "It is really worrying that at the heart of the banking industry lies a total lack of concern for what is fair for consumers. Most people are just dismissed by their bank and only the very persistent complainants will get anywhere."

Yet most customers stick with their bank even when their experience is primarily negative, noted Julian Parrott, partner at Edinburgh-based IFA firm Ethical Futures. "This plays into the hands of banks who still frequently maroon existing clients in lower interest accounts whilst offering top rates to attract new investors," said Parrott.

But he added. "My perception is that people would welcome a wider range of local or regional banks that can offer full banking services but that are not involved in the casino sector of investment banking."

Many dissatisfied bank customers cite the lack of alternatives to the brands that dominate the sector as their reason for staying put, but there are options outside the dominant model and their popularity has grown since the banking crisis unfolded. Here are a few:

• MUTUALS

The mutual model, in which members are the owners, remains popular despite the travails of the building society sector over the past two years, with Dunfermline among those rescued by Nationwide and the sector consolidating through a series of mergers and takeovers.

The perception of building societies remains largely positive and they still benefit from being considered an alternative to the Plc banks. Recent research from the Building Societies Association (BSA) claimed that mutuals beat banks for customer service across a range of measures, including value for money and treating customers fairly.

Rachel Le Brocq, spokeswoman for the BSA, said: "Building societies and mutuals bring democracy, competition, diversity and customer focus to financial services. Their knowledge of local markets and their understanding of individual customers' needs means they offer something different in the marketplace, which many of their members value highly."

Friendly societies are similar to both building societies and credit unions in that they have no shareholders, instead being run by and for their members. They are perhaps best associated with savings plans that are tax-free up to a limit of 25 a month or 270 a year (an idiosyncratic equation), although a number of societies are also active in the child trust fund market, including Scottish Friendly.

• CREDIT UNIONS

Membership of credit unions has surged as more people have turned to community-based banking in response to the banking crisis or after being rejected by mainstream lenders adopting increasingly strict criteria. Credit unions are not-for-profit organisations that are owned by their members, usually drawn from those living or working locally or belonging to certain organisations. The money they raise through pooling member savings is ploughed back into the community in the form of affordable loans to those who need them. Most unions offer a similar range of basic products to banks, including savings accounts, mortgages, personal loans and current accounts.

Glasgow Credit Union (GCU) has seen new member numbers rise from typically 1,000 a year to 3,000 a year in both 2008 and 2009. Leeanne Boulton, marketing officer at GCU, said: "As attitudes to finances change, people are looking to take advantage of what we offer; low cost, fair, transparent and ethical services where the member comes first," she said.

"Historically, credit unions may have been viewed as somewhere to go when people were turned down by banks but that misconception is thankfully redundant."

• ETHICAL BANKING

Brands perceived as having ethical practices have enjoyed a protracted bounce over the past two years as demand has grown for banks to be fairer and more ethical in their approach.

The Co-operative Bank has seen a 38 per cent hike in current account openings since the start of the downturn, while Triodos bank last year reported a 73 per cent rise in lending.

John Hughes, retail products business leader at Co-operative Financial Services, said: "There has been a real flight to trust as customers increasingly look for a bank which offers something different from the big four. Our financial strength and focus on continually raising the bar with regards to customer service has enabled us to continually attract new customers, who are now increasingly likely to switch their bank account, if they are unhappy with the service, facilities or ethos of their provider."

• ISLAMIC BANKING

Islamic banking complies with Sharia law, which prohibits the payment of fees for the renting of money, as well as investing in businesses that provide goods or services considered to be contrary to its principles. Islamic banks were sheltered from the credit crisis, largely because the charging or paying of interest is prohibited under Sharia law and because of their broadly conservative approach to financing. As the crisis unfolded such principles became increasingly attractive to those seeking an alternative to the banking status quo, although most high street banks now offer some Sharia compliant products.

• ZOPA

This online lending exchange offers a way to bypass financial institutions by allowing lenders and borrowers to deal with each other directly. Lenders set the interest rate at which they want to lend, how much they lend, the return they want and the risk level of the typical person they want to lend to. The latter factor determines the return available – the riskier the type of borrower chosen, the greater the rewards.

The rates offered are frequently more competitive than those available on the high street as credit card rates rise and providers restrict access to their best deals.