Not so much a bank as a statement

The bank manager is out - being replaced by an electronic service programmed to suit every lifestyle, says Nic Cicutti

More than 50 years after Britain's banks and building societies first started to cater for the vast mass of the population, rather than a relatively small minority, a revolution has slowly begun to take place.

Forget the bad old days, when visiting the bank manager, or even his spotty assistant, was like booking a hospital or a doctor's appointment. When time off work had to be specially arranged because the bank closed at 3.30 in the afternoon. Or inquiring about an account meant endless delays at the till, an impatient queue simmering angrily behind you.

Saturday banking? Automatic cheque book and statement requests? Stopping cheques or paying bills instantly? Arranging a mortgage, taking out life insurance? Many of these services have increasingly become available over the past decade or so.

But the big transformation now taking place in banking lies not so much in the availability of a range of such services but in the speed and the ease with which we now have access to them. The key to this transformation has been the telephone.

The phone takes the place of face-to-face conversations, of angry confrontations, of time-wasting lunchtime treks to the local branch. The telephone empowers us.

In one swoop the phone has done away with all the miseries and complications of the old system. In just a few seconds we can be in touch with someone who, it seems, has the answers to all our problems.

Someone available day and night, yet constantly polite, reasonably chatty, helpful - and impersonal. Banks, building societies, insurance companies - increasingly, everyone is leaping on board. Yesterday the Prudential, the UK's mightiest insurer, finally gave the phone its own seal of approval when it announced that it will launch a banking service offering mortgages and savings accounts. The service, set to start late next year, will be targeted not just at the Pru's existing 6 million policyholders but at all those others it believes are still waiting to take advantage of the telephone revolution.

Potential customers are now confronted with a choice. You like the traditional branch-based system? Any high street bank will oblige, usually with longer opening hours and a better queuing system than before. But if you are ready to dispense with the niceties of a branch set-up, there is now an attractive alternative. Ordering a cheque book, paying a credit card bill at 3am or moving money from a deposit to a current account is easy by telephone banking.

In truth, most of us don't need that level of freedom most of the time. As one phone banking executive explained, most people don't have the kind of lifestyle that forces them to make late-night calls to their bank. Daytime hours, plus the odd call during a break in Brookside, will do most of the time.

It is the sense of empowerment, the feeling that we could use the service if we wanted to, that prompts increasing numbers to opt for the additional potential of phone banking.

Doing it by phone brings extra benefits to the customer, mainly in terms of cost savings. In the case of First Direct, the first and largest phone banking service, it means the first pounds 250 of any overdraft does not incur any charges. Mortgages are at least 0.5 per cent cheaper than with most other lenders. No other high street bank, with a large and expensive branch network to maintain, can compete with this.

Meanwhile the traditional barriers between the various financial institutions are rapidly breaking down. It is possible to purchase travel insurance, mortgages, health insurance and travellers cheques, as well as traditional banking services, from a bank, a building society or even an insurance company. Financial institutions have become all-encompassing in what they offer consumers.

In part, this is the effect of competition. The convergence between the services offered by all these institutions means the phone has turned into the ultimate one-stop mechanism for all our financial needs.

Telephone banking does not have to be at the expense of the best bits of the old system. If one wants an old-style relationship with a bank branch, plus evening and weekend banking, it is now possible to mix the two, at least with Lloyds and Barclays.

But the momentum is with telephone banking. Anyone wanting to join the phone banking revolution has a growing range of accounts to choose from as more and more financial institutions feel obliged to get in on the act.

Spearheading the phone banking revolution until recently has been First Direct. Set up by Midland Bank a little over five years ago, it now has more than 450,000 customers with more joining every week. But most banks and building societies, including Royal Bank of Scotland, Alliance & Leicester and Barclays have now set up similar systems.

For those who prefer computer banking, Bank of Scotland can provide them with the software needed to run an account via a PC. Alternatively, they will even supply a phone and screen to do the same thing.

One of the costs of all this has been the dramatic cut in numbers of banking staff over the past decade, with tens of thousands of jobs lost. Banking unions argue that the extra benefits for customers have been a by-product of the mass redundancies rather than the rationale for the changes.

Many customers are deaf to this argument, however. They have seen the future and it works, even if it is at the cost of employees' jobs. It is not hard to see why. The past few years have seen dramatic changes, both in terms of our expectations and the bitter competition now taking place in the financial services sector.

Banks and building societies have been forced to come to terms with this change. There is even a "bank-speak" expression for it: delivery channels.

As one Barclays manager argues: "We have come to realise that there is no one way that people want to be dealt with." Nor is there one way in which they want to be dealt with for the rest of their lives.

This may mean dealing with some transactions over the phone, but going in to see a manager or financial adviser on another subject.

Banks are giving us the right to choose, with the telephone as one of the mechanisms for doing so. Perhaps, if there is one benefit from telephone banking it is that one word - choice. For many of us, it has been an agonisingly long wait.

Coutts & Co:

Rupert, 44, stockbroker, Coutts & Co

Before I married Jemima, her father-in-law gave me a word of advice. Judge a book by its cover, he said. Coutts looks as smart as the service it offers. It's good enough for the Royal Family after all. Mind you, you have to be pounds 3,000 in credit to qualify.

West Bromwich: Jack, 45, locksmith, West Bromwich Building Society

I don't want anything fancy. I get paid on a Friday and spend about 30 quid that night. I wouldn't hear the last of it on Saturday if I hadn't got the money for her trip to Kwik Save. So I like somewhere that's local, no fuss, like. And building societies are better value, that's what I hear, any road.

Halifax: Kate, 19, student, Halifax Maxim

Mum said bank with Barclays, they've always been good. But I wanted to go to India, so I settled for a Halifax Maxim account with its pounds 1,000 free overdraft facility. I blew it in one go! Mum said I shouldn't learn bad habits so early, but Dad said you're only young once.

Natwest: Belinda, 35, social worker, NatWest

I don't have time to worry about my money: there's not enough of it, for a start. I was put off Barclays as a student because they were investing in South Africa. Sometimes I wonder why I've stayed with NatWest. Bankers really know how to kick you when you're down. And they sometimes get my standing orders wrong.

LLoyds Bank: Margaret, 70, former primary school teacher, and Roy, 72, retired civil servant, Lloyds

We've been with our branch as long as the black horse has ... well, since we opened a joint account, anyway. We often meet the local manager at get-togethers. He's a nice chap. We like the personal touch. Our daughter says we're old-fashioned, but it's what you're used to ...

First Direct: Rod, 35, advertising director, First Direct

It was Warren that started it. Paid his mobile bill by phone when he got back from New York ... at 3 am. Neat, huh? Neat card too ... sharp black number. I can do anything with it, except make the bed and wash the dishes ...

The Cooperative: Olivia, 43, housewife, Co-operative Bank

I became a vegetarian five years ago after watching a TV programme. I do care for the environment. My daughter says I'm PC. So the Co-op's the bank for me: no animal testing, no dealing with oppressive regimes. Shame they don't have many branches.

Bnak of Scotland: Gordon, 27, computer programmer, Bank of Scotland Screenphone

I'm what you might call a wired-up kinda guy. Seriously switched on. Screenphone is right for those of us in the cyberworld. It's a smart piece of gear, a bit like a lap-top with a phone attached. I'm definitely tempted by their software-based systems next.