Should you switch banks to M&S?

Retail stalwart Marks & Spencer is launching a full-blown banking service next month. M&S Bank will open up to 50 branches in existing stores and offer current accounts and mortgages, bringing it into competition with Britain's established high-street banks.

As Elaine Moore puts it in the Financial Times, "M&S is the latest newcomer [US group Metro Bank and Virgin Money have also opened branches] hoping to capitalise on the mistrust that consumers feel towards the banking industry since the financial crisis in 2008". Indeed, M&S claims that a director had the idea for the banks when he saw that many of the people queuing outside Northern Rock had M&S bags.

So will M&S Bank take business from its high-street rivals? Consumer groups certainly think so, and have hailed the news. Marieke Dwarshuis of consumer watchdog Consumer Focus Scotland, says it is good to see another banking option for consumers. New players "mean more competition, consumer choice and healthy pressure on all banks to deliver better services".

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It's a nice thought, but perhaps a little optimistic, especially as M&S Bank won't be independent. The retailer sold its financial services unit, M&S Money, which offers credit cards, insurance and currency exchange, to HSBC in 2004.

The new bank's operations will be owned by HSBC, though business decisions and profits will be shared. So if you sign up for an account you'll actually be an HSBC customer. That means "it is unlikely that an M&S mortgage or current account is going to be much different from that already offered by the banking giant", says Lisa Buckingham in This is Money.

In fact, argues Damien Reece in The Daily Telegraph, M&S isn't competing with banks, it's doing them a favour. "Bank brands are diminished but still cost millions in marketing to maintain. Yet with interest margins squeezed and costs rising, including the UK's bank levy, HSBC's top brass have long asked how they can make money while maintaining a large branch network." The M&S model allows banks to become low-cost wholesale providers of banking services and let retailers deal with costly branding.

On the bright side, while details of the new accounts aren't out yet, M&S Money has a decent track record. Several of its individual savings accounts feature on the best rate' tables of consumer group Which?. Another advantage is that the branches will keep retail hours and open on Sundays, meaning that M&S Bank will be the first British bank to offer seven-day banking.

"M&S is always keen on its packaging, so expect its accounts and mortgages to be nicely presented," says the BBC's Simon Gompertz. But "you will have to wait a few weeks to see whether the charges and interest rates are attractive enough to tickle your fancy".