Pending downfall of higher savings rates? 12 March at 2:44PM edited 12 March at 3:57PM in Savings & investments 14 replies 1.9K views

ircE

Picked up an interesting nugget from this article in The Times, on banks and building societies offering different versions of essentially the same account with different rates because e.g. one was online access only.

Kevin Mountford, the co-founder of the savings platform Raisin UK, said: “I think you would be hard pressed to argue under the new consumer duty rules that you can have the same product at a different price just because a customer uses the branch.”

The Consumer Duty rules created by the Financial Conduct Authority (FCA), the City regulator, come into effect later this year to ensure that financial firms put customer needs first.

The FCA said: “Firms will be expected to prove to us that their products offer fair value, in particular that they have ensured that any customers who are vulnerable are not disadvantaged.”

Anyone know more about these new rules and able to explain them for lay people? And any thoughts on what this might mean for the savings account market?

aaj123

Differing levels of service could perhaps be argued to be different products.

And then there is also online only accounts that don't have any branches to start with.

I therefore can't see how it can have any meaningful effect on the offerings overall. 

Band7

ircE said:

Kevin Mountford, the co-founder of the savings platform Raisin UK, said: “I think you would be hard pressed to argue under the new consumer duty rules that you can have the same product at a different price just because a customer uses the branch.”

Surely it is not hard to understand that brick & mortar services, provided by appropriately trained staff in dozens or even hundreds of locations, will cost more than a centralised IT and CS operation.

Is Mountford suggesting that internet customers should pay for the Branch infrastructure (e.g. through lower interest rates)? If so, he is effectively just promoting the acceleration of Branch closures. 

aaj123

Band7 said:

ircE said:

Kevin Mountford, the co-founder of the savings platform Raisin UK, said: “I think you would be hard pressed to argue under the new consumer duty rules that you can have the same product at a different price just because a customer uses the branch.”

Surely it is not hard to understand that brick & mortar services, provided by appropriately trained staff in dozens or even hundreds of locations, will cost more than a centralised IT and CS operation.

Is Mountford suggesting that internet customers should pay for the Branch infrastructure (e.g. through lower interest rates)? If so, he is effectively just promoting the acceleration of Branch closures. 

And more so because that would be the only way to compete with Internet only savings providers who don't have branches to begin with. 

Albermarle

aaj123 said:

Band7 said:

ircE said:

Kevin Mountford, the co-founder of the savings platform Raisin UK, said: “I think you would be hard pressed to argue under the new consumer duty rules that you can have the same product at a different price just because a customer uses the branch.”

Surely it is not hard to understand that brick & mortar services, provided by appropriately trained staff in dozens or even hundreds of locations, will cost more than a centralised IT and CS operation.

Is Mountford suggesting that internet customers should pay for the Branch infrastructure (e.g. through lower interest rates)? If so, he is effectively just promoting the acceleration of Branch closures. 

And more so because that would be the only way to compete with Internet only savings providers who don't have branches to begin with. 

Although many customers ( the majority probably ) will not go near on line only banks/ banks they have never heard of.  A lot are still reluctant/unable even to use on line services offered by traditional providers, and not just very old people.

Band7

Albermarle said:

aaj123 said:

Band7 said:

ircE said:

Kevin Mountford, the co-founder of the savings platform Raisin UK, said: “I think you would be hard pressed to argue under the new consumer duty rules that you can have the same product at a different price just because a customer uses the branch.”

Surely it is not hard to understand that brick & mortar services, provided by appropriately trained staff in dozens or even hundreds of locations, will cost more than a centralised IT and CS operation.

Is Mountford suggesting that internet customers should pay for the Branch infrastructure (e.g. through lower interest rates)? If so, he is effectively just promoting the acceleration of Branch closures. 

And more so because that would be the only way to compete with Internet only savings providers who don't have branches to begin with. 

Although many customers ( the majority probably ) will not go near on line only banks/ banks they have never heard of.  A lot are still reluctant/unable even to use on line services offered by traditional providers, and not just very old people.

....but mainly older people

aaj123

Albermarle said:

aaj123 said:

Band7 said:

ircE said:

Kevin Mountford, the co-founder of the savings platform Raisin UK, said: “I think you would be hard pressed to argue under the new consumer duty rules that you can have the same product at a different price just because a customer uses the branch.”

Surely it is not hard to understand that brick & mortar services, provided by appropriately trained staff in dozens or even hundreds of locations, will cost more than a centralised IT and CS operation.

Is Mountford suggesting that internet customers should pay for the Branch infrastructure (e.g. through lower interest rates)? If so, he is effectively just promoting the acceleration of Branch closures. 

And more so because that would be the only way to compete with Internet only savings providers who don't have branches to begin with. 

Although many customers ( the majority probably ) will not go near on line only banks/ banks they have never heard of.  A lot are still reluctant/unable even to use on line services offered by traditional providers, and not just very old people.

Hence I don't think FCA really means for banks to offer one rate for all kinds of access. Otherwise, banks will need to make a choice of either serving savvy customers or the non savvy ones but not both. 

Albermarle

Band7 said:

Albermarle said:

aaj123 said:

Band7 said:

ircE said:

Kevin Mountford, the co-founder of the savings platform Raisin UK, said: “I think you would be hard pressed to argue under the new consumer duty rules that you can have the same product at a different price just because a customer uses the branch.”

Surely it is not hard to understand that brick & mortar services, provided by appropriately trained staff in dozens or even hundreds of locations, will cost more than a centralised IT and CS operation.

Is Mountford suggesting that internet customers should pay for the Branch infrastructure (e.g. through lower interest rates)? If so, he is effectively just promoting the acceleration of Branch closures. 

And more so because that would be the only way to compete with Internet only savings providers who don't have branches to begin with. 

Although many customers ( the majority probably ) will not go near on line only banks/ banks they have never heard of.  A lot are still reluctant/unable even to use on line services offered by traditional providers, and not just very old people.

....but mainly older people

Firstly that depends on what you call old. I have a friend and a family member, both in their Fifties, who only recently have started with internet banking, and would never dream of having a savings account with anyone but a well known name. Neither would consider banking via their phone . One hasn't even got a smartphone by choice.
Even my OH, who is  more digitally advanced than most of her friends, is very reluctant when I suggest moving money to a bank she has never heard of, although I usually win the argument in the end !

allegro120

In the past 10 years or so at least 4 bank branches were closed within 1 mile distance from my home.  This is the way it is going and I don't think we will see it reversed. It doesn't affect me personally, if I need to deposit cash I still have NatWest branch nearby and a lot of others only 2 miles away, but it is a big disadvantage for people with different needs, circumstances and locations.
On-line banking was replacing branch banking for a while and with continuing advance of technology "app only" banking market will grow.  I don't think this transition will have a significant impact on savings rates, but the inflation trends will. 

dale_cotterill

ircE said:

Picked up an interesting nugget from this article in The Times, on banks and building societies offering different versions of essentially the same account with different rates because e.g. one was online access only.

Kevin Mountford, the co-founder of the savings platform Raisin UK, said: “I think you would be hard pressed to argue under the new consumer duty rules that you can have the same product at a different price just because a customer uses the branch.”

The Consumer Duty rules created by the Financial Conduct Authority (FCA), the City regulator, come into effect later this year to ensure that financial firms put customer needs first.

The FCA said: “Firms will be expected to prove to us that their products offer fair value, in particular that they have ensured that any customers who are vulnerable are not disadvantaged.”

Anyone know more about these new rules and able to explain them for lay people? And any thoughts on what this might mean for the savings account market?

The FCA doesn't actually have an enforcement mechanism on Consumer Duty. It's one of the most toothless pieces of regualtion they've ever invented.

It just requires banks to fill out lots of forms and file them, to show that they have considered these things when making products. There is nothing in it to say that the FCA can interfere in price setting. It doesn't even prevent the likes of Cynergy re-issuing the same product at a higher rate.

allegro120

dale_cotterill said:

ircE said:

Picked up an interesting nugget from this article in The Times, on banks and building societies offering different versions of essentially the same account with different rates because e.g. one was online access only.

Kevin Mountford, the co-founder of the savings platform Raisin UK, said: “I think you would be hard pressed to argue under the new consumer duty rules that you can have the same product at a different price just because a customer uses the branch.”

The Consumer Duty rules created by the Financial Conduct Authority (FCA), the City regulator, come into effect later this year to ensure that financial firms put customer needs first.

The FCA said: “Firms will be expected to prove to us that their products offer fair value, in particular that they have ensured that any customers who are vulnerable are not disadvantaged.”

Anyone know more about these new rules and able to explain them for lay people? And any thoughts on what this might mean for the savings account market?

The FCA doesn't actually have an enforcement mechanism on Consumer Duty. It's one of the most toothless pieces of regualtion they've ever invented.

It just requires banks to fill out lots of forms and file them, to show that they have considered these things when making products. There is nothing in it to say that the FCA can interfere in price setting. It doesn't even prevent the likes of Cynergy re-issuing the same product at a higher rate.

Yes, FCA is rather useless and on some occasions damaging when authorising some investments firms without checking that their loan book was in deep crisis.