Stronger competition at the top end of the market

Adrian Graves, of the National Association of Bank Customers, believes the new bank will do just that and "it has enough critical mass in the market to challenge the old big four".

Increased competition usually means there are big differences between the best and worst deals.

That has been evident in the mortgage market, the Halifax's core business.

Earlier this year, the Nationwide Building Society sparked a price war by cutting rates. Others, including the Halifax, have been forced to follow suit.

The competition in this basic product has forced the former building society to move into new areas.

Intelligent Finance or IF, the telephone and internet banking arm of the Halifax, now has 150,000 accounts and close to �3bn in balances.

Overpaying for services

Other products developed by the Halifax could be marketed effectively to Bank of Scotland customers.

Popularity does not come cheap, though. When the Halifax announced its range of customer-friendly measures, it also said it would slice about 10% off its profit margin.

Consumer bodies would argue there is plenty left and the �1bn profit announced by the Bank of Scotland gives some indication of just how much.

Nobody expects a bank to act like a charity but Don Cruickshank, who carried out a report into the industry last year, claimed consumers were overpaying for services by up to �5bn a year.

He also said there was a need to strengthen competition at the top end of the market.

The creation of HBOS will do just that. Consolidation in banking is unlikely to stop here.

There are industries - such as retailing - where the little guys can beat the odds, but banking no longer appears to be one of them.

The prices of financial products are becoming more transparent and consumers know it.

It is only the big players who can afford to deliver what they want.