Is it really possible to reward loyalty?

Like most banks, Natwest has been busy trying to persuade the world that it's changed its ways over the past few months. Its latest adverts talk about how it's now "Fairer Natwest" - offering the same great deals to existing customers as it does to its new ones.

In a similar vein, a few months ago it announced it was not going to offer 0% interest credit cards anymore, because it believes it's unfair to offer a teaser rate, only to ratchet it up to 20% or so a few months later. And there are no teaser rates across its savings products either.

This may all sound like the makings of a new friendly bank - but the downside of doing things differently in a market where everyone else is playing by another set of rules, is that your products end up looking a little limp.

Does fair have to mean poor value?

Natwest's 0.75% cash Isa may come with no funny business, but it's also paying almost 1% less than the market leaders. The Post Office will pay you 1.55% and when its teaser rate comes to an end, you'll still revert to 0.75%, the same as the Natwest account is paying.

In the credit card market, Natwest may offer a nice low rate of 6.9% - but given that you can now get 0% for almost three years, you could waste hundreds of pounds of extra interest by plumping for a Natwest credit card.

I wonder if Natwest has missed the point here. It's true that customers hate having to switch their money around to chase the best rates. But the real crime in the savings market was simply that rates fell so far - and that banks were not very good about reminding customers that their teaser rate was coming to an end. I imagine most Natwest customers would still like to be offered market leading savings rates - but would also appreciate an email, a text and maybe even a letter when the rate is about to expire, to remind them that it's time to switch. If, at that point, they don't get round to it, then they might like the comfort that their rate is not going to plunge to 0.01%.

In the credit card market, customers love 0% offers. The scandal with them is that the penalties are too severe. You can lose your entire 0% deal if you miss a payment. As for the reversion to a higher rate - well, of course people would prefer to pay 0% indefinitely, but given that's not possible, then all people need is adequate warning to either pay off their debt or move it elsewhere once the deal comes to an end.

Fairness is about transparency

It's admirable to want to reward loyal customers. But unfortunately, in a market where the best deals are paid for by the apathy of a section of the customer base, it's very hard to do this. Many insurance policies are priced at a loss in year one, based on the knowledge that a large proportion of customers won't switch when the company pushes up prices in years two and three. Is that fair? Yes, probably - as long as the insurer was upfront and gave the customer every chance to switch.

So on aggregate, is Natwest fairer? Not really. It has opted out of chasing new business in the savings and credit card markets - and is offering lower savings rates and higher credit card rates than its competitors.

As someone who runs a company called Fairer Finance, I confess that my ears prick when I see a company boasting that they are fair. Natwest follows on the heels of Santander - who's advertising proclaims it to be "simple, personal and fair".

For me, fairness is about transparency. Financial products are complex - and as much as we all crave a world of simplicity, it's a false eutopia which would leave most of us worse off. Fair financial markets are ones where companies don't take advantage of people's ignorance, not their inertia. Ultimately, I'm fine with banks and insurers penalising customers who are apathetic - as long as they went as far as they could to let them know that they could do better by switching. After that, customers have got to take some responsibility for themselves.