Best savings account provider

If the results of this year's Consumer Finance Awards are anything to go by, interestingly, there is no clear-cut winning formula for institutions offering savings accounts to follow.

The award for best savings account provider has been won jointly by two banks, Cahoot and First Direct, who each take very different approaches to customer service.

Cahoot, the internet bank set up by Abbey National in June 2000, has made consistently attractive rates on a range of straightforward, easy-to-use products it's main selling point. The bank is aimed at customers who are happy to carry out the majority of their transactions online, without the backup of a costly human phone-based or branch-based services. And the payoff for such customers is the attractive product rates Cahoot can offer because of its low overheads as an internet-only bank.

Its easy access, monthly interest savings account regularly features in the best buy charts and currently pays a gross rate of 4.02%. Since its launch in October 2002, the bank has attracted over 85,000 customers to its savings account. Head of Cahoot Tim Sawyer says: "Since Cahoot launched in June 2000, we have seen dramatic changes in the online savings market, with a number of new entrants and casualties along the way. We believe our success can be seen not only in terms of offering customers competitive rates, but also in being able to sustain those rates beyond the headline advertising."

In contrast, First Direct makes no claims to offer market leading rates on its three savings accounts, the latest of which is the monthly interest bonus savings account, also launched in October 2002. This pays tiered rates starting at 3.54%, including a bonus for no withdrawals in any one calendar month of 1.22%, on minimum balances of ?3,000. So far, it has attracted 50,000 account holders.

However, the bank, which pioneered standalone telephone banking and now offers customers the choice of banking by phone or internet, has a long-standing record of award-winning customer service. It has been top in the MORI poll of customer satisfaction with banks for the past 11 years, and with a third of its customers joining on the basis of personal recommendation, First Direct puts its success down to offering good-value products with a human touch.

Managing director Alan Hughes says: "We treat our customers as we like to treat each other, as individuals and human beings, not account numbers. We manage by values, not by rules. Our call centres are not scripted. We recruit people with personality and common sense, not financial services experience. Above all, we offer a combination of value-for-money pricing, outstanding customer service and ease of use at a time and channel to suit the customer. Our customers find this a compelling combination." Over 97% of First Direct's 690,000 savings accounts have been taken out by the bank's existing current account customers. So the take up of its savings accounts is reliant primarily on existing, satisfied customers sticking with, "a trusted brand with a superlative reputation for customer service".

Sue Platt-Mellor, an NHS worker from Dorset, joined First Direct as a current account customer in 1995 on the recommendation of her best friend's fiancé. "I wanted to leave the major high street bank I was then with because I found their service very bureaucratic and condescending. So I thought I'd give First Direct a whirl and I've never looked back since."

On the practical front, Mrs Platt-Mellor, whose work involves travelling, says she loves having the flexibility to call her bank 24 hours a day, seven days a week, from anywhere. "I'll often call at 10 in the evening from a hotel room, for example, or from the comfort of home on a weekend," she says.

But it's the customer service standards that have really turned her on to First Direct. "I get absolutely excellent, personal service every time I call," Mrs Platt-Mellor says. "You talk to a human being - there's no dreadful automated service - and they are consistently polite, helpful and efficient. They don't keep you long on the phone and you can get a lot of banking transactions arranged in one quick, cheap call. I've always found money matters daunting, but they make it easy without being pushy."

High praise indeed. But the true strength of her customer loyalty shows when asked about the bonus savings account she opened last month on the advice of a First Direct phone operator.

"He'd noticed I'd put a large sum of money into my ordinary savings account - an equity release from my mortgage to carry out home improvements - and suggested I'd be better off putting some into a bonus account," she says.

Despite being aware that she could get higher interest on her money by shopping around and opening a top paying account elsewhere, Mrs Platt-Mellor says she is sticking with First Direct. "I see earning a bit less as effectively paying a little extra for the excellent service I get," she says.