Time to end free banking? Poll help needed

MoneySaverLog

Just keep it as it is, free in credit banking and then...

You pay to go overdrawn
You pay for ALL Added Value Accounts

Simples, no need for change.

pqrdef

innovate wrote: »

There's always the OFT as the last resort if enough consumers want to have a given practice investigated for fairness.

They lost the court case over overdraft charges and late fees.

And they already know that packaged current accounts are just PPI all over again, but they don't know what they can do about it.

andy_allblack

MoneySaverLog wrote: »

Just keep it as it is, free in credit banking and then...

You pay to go overdrawn
You pay for the ALL Added Value Accounts

Simples, no need for change.

Sounds good to me!!!!!!!

pqrdef

Time was when banks were only for businesses and the middle classes, and people had banks like they had solicitors and doctors.

Then the banks expanded down-market, and the relationship-based business model was replaced by a product-based business model. Everything was commoditised and Macdonaldised, and your local bank branch would no longer take your mail, buy your shares or babysit your kids.

But it's not working. Financial products are low-volume items and difficult and expensive to sell, especially when there's no customer loyalty and the customer has to be re-won for every separate product. The customer acquisition costs are ugly and have to be passed on to the customer, who may then find that most of what he pays for the product is the cost of selling it to him.

Something needs to change radically to bring down selling costs. Internet banks were supposed to do it, but they turned out to be useless at acquiring customers. Websites just can't close sales.

Probably what needs to go is the vertical integration. The point about retailers - independent travel agent, insurance broker, Tesco - is that they sell rival product brands side by side. They can concentrate on building a base of regular customers without the customers being too restricted in choice of product.

Banks should concentrate on wholesale, and leave retailing to retailers - people who know about customers more than products. Nobody at Tesco cares about the relative merits of Ariel and Persil. They only have to worry about the relative merits of Tesco and Sainsburys.

This would mean designing products to be sold and serviced by retailers. Then, if you have a problem with your bank account, you don't phone the bank, to be told it's all your fault, you phone the shop, and they have facilities to sort it for you. And they're on your side, and if they can't sort it, they'll take your bank account back and exchange it for a different make.

We don't need that many retailers. Most of us buy most of our groceries at the big four, and many people go to the same supermarket every week. In fact, it's because of this concentration that everything now comes in a choice of Spring Fresh, Summer Haze or Alpine Blossom, whereas in the old days you had a choice of 23 different corner shops within half a mile, and all of them only stocked Pine.

System

I confess that I haven't read the whole thread, but many responses show that a poll will be useless. It's hard to grasp that "free" banking is not free, because people who stay in credit pay in forgone interest, and (usually) by paying when they call their bank on its revenue-generating 0845 number.
To get a meaningful response, a poll would have to explain carefully that banks could have a fair and transparent charging structure including:
1. Fair interest on credit balances
2. Charges for transactions that reflect their costs: eg (I guess) £1.00 per cheque; zero for direct debits (because the company taking the direct debit pays, and passes on the charge in its price to me); 20p for a withdrawal from a cash machine; 50p for a bill payment arranged over the phone; 5p for a bill payment I make using on-line banking, etc etc.

antrobus

rmg1 wrote: »

Erm .... no it wasn't.
...

Erm yes it is. It'll be in that clause that says what you're getting is an 'account'. An account with a bank is just like an acount with anybody else; merely a bookkeeping record of a debt that's due from one party to another. If all you wanted to do was for the bank to look after your money then you should have asked for a safety deposit box.

opinions4u

On my next trip to Tesco it will look something like:

Use of private road into the car park: 50p in. 50p out.
Use of car park: £1.20 an hour.
Trolley hire: £1.00 an hour.
Aisle use: 10p an aisle capped at £1.50 per visit.
Checkout charge 75p a visit (40p self service with a 25p charge for manual help).
Customer service desk: 50p per conversation.

Cost of goods cut by 4% across the board to compensate. With the reintroduction of double Clubcard points!

Is that better for the consumer?

antrobus

Thrugelmir wrote: »

Free current account banking is a major disincentive to new entrants in the retail banking sector. As the cost has to be recovered from somewhere and someone.

That's actually very true.

antrobus

pqrdef wrote: »

....But it's not working...

What's not working?

On the whole PCAs work just fine. The debate is about how to pay for them.

YoungNick wrote: »

I confess that I haven't read the whole thread, but many responses show that a poll will be useless.

You might very well think that; I couldn't possibly comment.

pqrdef wrote: »

....
To get a meaningful response, a poll would have to explain carefully that banks could have a fair and transparent charging structure .....

That's what the OFT has been trying to achieve.

innovate

YoungNick wrote: »

zero for direct debits (because the company taking the direct debit pays, and passes on the charge in its price to me)

Why should I pay zero for a direct debit? Why should I not always be paid for paying by direct debit, and for maintaining a current account in credit?

As the Santander 123 account demonstrates, banks can afford to actually pay their customers for (at least some) Direct Debits, and for maintaining a balance. Lloyds also incentivise people for maintaining a current account balance. There are other, similar examples - Halifax, Nationwide, First Direct, HSBC to mention but a few.

I'd put it to all of you that they don't make a loss from offering us those accounts - quite the contrary. If these accounts weren't profitable for them, they wouldn't offer them.

Granted, we have to play by certain rules to get the benefits. But it's not exactly hard to figure out what the rules are, and whether you can play by them. If you can't, don't play - if you can, you'd be pretty daft not to play.

E.g.

• at Santander, I have to deposit £500 a month, and pay Santander £2/mth for the privilege, but they pay me about £11 in cashback each month, and a relatively decent (for the current times) amount of interest if I keep a decent balance in the account. Even without the balance, they pay me for 1) having a current account with them, and 2) for paying certain companies by direct debit.
  .
• at Nationwide, I have to deposit £750 a month, and in return I get access to a pretty good 6% Regular Saver Account, a year-round european travel insurance with pretty decent T&Cs, a market-leading instant access ISA (during the traditional "ISA season"), and quite a good credit card for foreign spending

None of the above were under any publically noticeable competitive pressure to introduce such offers. So, where's the evidence that banks have to explicitly charge us to give us [what we perceive as] value? They'll never tell us exactly how much money they make from each of us, and what they can reasonably afford to pay each of us - - - but I would eat my hat that absolutely all of them can comfortably afford to pay their current account customers when their current accounts are in credit, as opposed to having to charge them.

Those now whining that this would be at the expense of customers who have current accounts not in credit should be reminded that the only sustainable way forward for them is to get themselves into a no-overdraft position, on a pretty permanent basis.

Why on earth would any of us want to have a current account with a bank that charges us various fees