HSBC says it could charge for current accounts

eskbanker

Discussion on a discussion board, eh, whatever next....?

Seems more appropriate to me to be discussing relevant financial subjects than pontificating about other posters, but hey ho, each to their own....

eskbanker

I don't know if there is anything more recent in the public domain but the CMA's 2014 review of personal current accounts (PCAs), at https://assets.publishing.service.gov.uk/media/53c834c640f0b610aa000009/140717_-_PCA_Review_Full_Report.pdf, offers some insight into how they're viewed within the industry, which isn't entirely unanimous:

2.66 As set out in the introduction, we have not undertaken a profitability analysis of PCAs as part of this update but during the course of our work we have heard views that PCAs are cross-subsidised with other retail banking products. A report by Credit Suisse has reviewed the profitability of UK retail banks both at aggregate level and between products and found that mortgages and credit cards are the most profitable products, while current accounts (personal and business) are loss-making. We have also heard from one PCA provider that PCAs are loss-making for them.

2.67 This seems to suggest that there might be a degree of cross-subsidy between activities within retail PCA providers which, if true, could itself be distortive of competition. It might also represent a barrier to entry and expansion.

2.71 In general most PCA providers recognise that PCAs provide valuable opportunities for follow-on sales. TSB states in its prospectus that PCA customers are considered to be very valuable by PCA providers as they have historically been likely to hold other products (such as mortgages, savings and loans) with the bank providing their PCA. Another bank contemplating entry in the PCA market told us that offering PCAs was essential to be perceived as a ‘full-service bank’, However, PCA providers also pointed out that cross-sales were not guaranteed and that most customers had relationships with a number of financial services providers besides their PCA provider. One bank also stressed that PCAs remained a profitable product in its own right, and that they were not selling PCAs at a loss to capture the value of follow-on sales.

MalMonroe

Thrugelmir said:

Why should current account banking be free?  Services have to be paid for by someone. 

Why shouldn't it be free? Banks make enough money out of customers already. I don't want to have to pay for my current account.

Thrugelmir

etienneg said:

eskbanker said:

etienneg said:

If current accounts cost banks so much to run, why ever do they bother paying such large bonuses for people to open them?

Loss leaders, hoping to cross-sell more profitable products or to generate overdraft income.

I've heard this before and I don't accept it. Supermarkets have loss leaders, but they aren't expensive things for them. 

Supermarkets can run loss leaders as the companies who own the products/brands provide promotional support. Supermarkets with their wafer thin trading margins aren't going to give money away. 

NottinghamKnight

MalMonroe said:

Thrugelmir said:

Why should current account banking be free?  Services have to be paid for by someone. 

Why shouldn't it be free? Banks make enough money out of customers already. I don't want to have to pay for my current account.

I don't want to pay for most things and will gravitate to the cheapest provider that supplies the goods and services I require or want. The difficulty with the current 'free' model is that the banks make most of their money from the poorest, or at least aware. 

k12479

eskbanker said:

2.71 In general most PCA providers recognise that PCAs provide valuable opportunities for follow-on sales....One bank also stressed that PCAs remained a profitable product in its own right, and that they were not selling PCAs at a loss to capture the value of follow-on sales.

Interesting. I wonder which bank that was and how that might have changed, considering that data is 6+ years old. Also relevant though is the very next section, a trend which it would be reasonable to assume has continued since then:

2.73 There is some evidence that cross-selling is becoming slightly less effective: according to Mintel the average number of products bought from the main PCA provider has fallen from 1.9 to 1.7 since 2011. Mintel also reports that a growing number of PCA customers appear to have moved their savings away from their main bank over the last two years, possibly driven by low interest rates.

Eco_Miser

Dr_Crypto said:

Were accounts always free? If you went back to the 70s or even 50s would you have got a free bank account? 

I guess fewer people had bank accounts then though and many people were paid in cash. 

In 1968 Yorkshire Bank current accounts were free (except for the 2d stamp duty on the cheques - but that went to the government), but most other banks charged.

adamp87

Whoever is the first bank to take the hit & bring this in for basic accounts, if they did would probably see large closures as people move elsewhere.

Dr_Crypto

Depends on how much they charge. Most people can't be bothered moving banks and I believe the majority of people stay with the same bank they start with as a young person. 
If it was £5 a month or something I doubt many people would bother, especially if they were generally happy with the service provided. 

RG2015

Dr_Crypto said:

Depends on how much they charge. Most people can't be bothered moving banks and I believe the majority of people stay with the same bank they start with as a young person. 
If it was £5 a month or something I doubt many people would bother, especially if they were generally happy with the service provided. 

Does that include you?

I doubt many people here would be not be bothered.