Ever since The Co-operative Bank introduced free banking to customers remaining in credit back in 1974, the concept of paying for my current account has never crossed my mind. Why would it?
But now Andrew Bailey, a director at the Bank of England who soon takes the reigns as the City's top regulator, has said that free banking is dangerous and needs to be reformed.
His argument is that the idea of free banking misleads customers because they cannot see how their account is being paid for while at the same time, he argues, banks themselves may not understand the costs associated with running the ‘free’ accounts.
Leaving aside the issue of how increasingly people seem to want something for nothing, it seems hard to believe that banks – financial institutions, after all – are not aware of the cost of providing their retail offer. Knowing the real price of a service you offer, seems to me to be one of the first rules of running a good business.
And as for the thesis from Mr Bailey that banks mis-sold products because of the lack of transparency in current account charges, well I have news for the sector. You CAN market responsibly! It requires a corporate decision about how to run a responsible business. It’s not rocket science, just an understanding that a good long-term business needs good long-term customers, not customers seen as a quick cash cow.
But the reason I expect ‘free’ banking on a current account is that I am essentially lending my money to the bank at no interest, the least I can expect for my loyalty is that the bank looks after it for free.
We certainly need to re-instil a sense of worth rather than a focus on ‘free’ across a range of sectors, but in banking it seems we might be in danger of swapping ‘free’ banking for consumers for paid for loans to banks!
Posted at 3:05pm on 24th May 2012
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