The end of free banking... It'll never happen!

[thegoodsamaritan]

The banks all seem to want to scare us with quotes like "well if we don't charge for unpaid direct debits etc then it will mean an end to free banking in this country"

 

Just had an interesting chat with a friend of the family the other day who works for a management consultant company that's heavilly involved in advising the banking industry about how best to maximise their profit. Didn't mention this site - just asked him what his thoughts about bank charges were. His take the on the charging situation was basically "we live in a capitalist world thats just the way it works" but also more interestingly that "Banking is set to become a whole lot cheaper for consumers in the next year or two but the banks will fight all the way to delay lowering charges" When I questioned him on an end to free banking and said that was the way I thought it might go he said it definitely wouldn't happen.

That's just his opinion but saying as he's one of the people actually advising the banking industry thought I'd share his thoughts with everyone.

 

Sorry I've not posted for a while I just don't get the time these days due to family commitments. (likewise for lack of responding to personal messages sorry again)

[Bookworm]

Welcome back, I did wonder where you'd got to!!!

 

What gets me is this:

 

His take the on the charging situation was basically "we live in a capitalist world thats just the way it works"

 

In other words, because it's a capitalist world, it's ok to operate outside the law? And this from a top adviser? Jeez.....

[Guest Niklowe]

I can't see it happening either because of two points.

 

1. Do you remember a while ago when pensioners were bombarded by adverts from the DWP to change their existing arrangements for payments? the government launched a lengthy campaign to persuade pensioners to open bank accounts. If these pensioners were now to be charged monthly fees there would be uproar from the pensioner action groups and no doubt this would be taken up by the press.

 

2. Only one bank has to stay with the status quo, to result in their customer base rising considerably, hence their profit's would rise. How would the other banks be able to justify their charges

 

If in fact ALL banks changed to a monthly charge scheme would this not raise the question that they were operating a cartel? Surely the OFT would question this?

[meagain]

Surely the OFT would question this?

 

Wouldn't have thought so. After all, they didn't bother with all the banks making excessive charges, and haven't bothered with the banks who have slashed their charges on defaults, but "coincidentally" increased their tariffs on a number of other services (which now means you can label those as unfair too).

[Guest Niklowe]

They used to have monthly charges till one bank started free banking. I think it's going round in circles. You can't beat competition.

[Tobes]

I don't think banking will cease to be free, but the banks are definitely changing emphasis - fee-charging accounts are becoming more advertised as the norm, with heavy ad campaigns, and heavy up-selling...Free-banking could shrink to crappy basic accounts with hardly any features...Are bank required to proivde debit cards and direct debit facilities? Plus they could make the service for such accounts so crap...

[Guest Niklowe]

Then again, the banks that do offer debit cards and direct debits would steal from those that don't. Competion rules OK

[Guest NATTIE]

In my personal opinion, I do believe that we will move towards a fee based system of banking, similar to business accounts at the moment. However, I don't see it happening within the next few years at the moment.

[One of Them]

I can tell you honestly that it IS a route banks are considering taking.

 

And the fee's recouped from charges would pale in comparison to those made by charging for accounts. And in that way, everyone loses out.

[Guest NATTIE]

I think everyone I know who works for banks and are aware of the charges issue believes that will happen but as to how it will work is a different matter

[meagain]

Part of the problem is that whoever is first to introduce the fees would likely lose a lot of customers right there, so we'd be potentially facing a cartel situation, where one bank announces a date for the introduction of fees, then all the other banks follow suit within weeks announcing the same date.

 

Why aren't the OMM (or Competition Commission, or whatever they're called these days) looking into this?

[Rosemary]

"And the fee's recouped from charges would pale in comparison to those made by charging for accounts. And in that way, everyone loses out" - quote from 'One of Them'.

 

And does that then make it alright?!!@**!!

 

Just take your 'bank hat' off for one minute and look at this with a 'legal' hat on, because I don't think you really, really get it. It is not equitable to take excessive amounts of money - (just because you can) from 'Peter', so that it puts you into the delicious position of offering free banking to 'Paul'. This is plain good old common sense based on more than 500 years of UK contract common law. If you breach your contract with me, I cannot, repeat cannot, claim back all sorts of monies because of your breach - not even loss of expectation (ie. if I was due to make shedloads of money from our contract). I can only claim my realistic losses. THAT'S IT. And banks are under the same laws as we are. Believe me - this is true. I have had the benefit of studying contract law and consumer law during my LLB and these basic principles apply to every one of us and every organisation out there under the jurisdiction of England and Wales.

 

NOW, how the banks recoup this money is a different matter. And, no doubt, they will be looking at removing free banking. Sorry but I for one, would prefer that, to knowing that my free banking was courtesy of someone elses misfortune.

[Guest NATTIE]

In the 1980's banks charged for accounts until HSBC removed account charges for having account. When one goes all will go and charges will go down, in my humble opinion

[zedcee]

I would prefer my bank to charge me a monthly fee , above board (and all the bonuses - free holiday insurance or whatever) than sneakily get money out of me using charges. There are plenty of us here who have had charges of over £150 a month - i cant imagine many people would open an account with a monthly fee that big.

[Andy999]

I think banks will continue to offer free banking, but only to those either maintaining a certain balance, using other bank products or crediting a certain amount each month. Everyone else would probably have to either pay, or get a rubbish type of account.

 

To be fair, i don't think banks would mind losing a lot of their customers - the ones who never have any money in their accounts actually cost the bank money, so if those customers close their accounts, the banks won't care. One bank I have worked for could tell how much profit they made from an individual customer - if this was negative, we wouldn't argue if you said you wanted to close your account.

[tim2718281]

When you go into a shop and buy something with your debit card, the banks charge the store.

 

If they want to keep taking that money from stores, they've got to keep their customers.

 

I'm sure that if UK banks introduce charges, someone will find they can run a bank at a profit without charging their customers for these transactions ... though they might charge for cheques and other transfers where they do not get paid by the recipient ... and we might even accept paying 50p for cash withdrawals from ATMs.

 

Tim

[meagain]

I'm sure that if UK banks introduce charges, someone will find they can run a bank at a profit without charging their customers for these transactions

 

Irrelevant, since the banks could still run at a profit if they dropped all charges. HSBC made something like £11bn last year from its investment business alone.

[Janeyh]

I can tell you honestly that it IS a route banks are considering taking.

 

And the fee's recouped from charges would pale in comparison to those made by charging for accounts. And in that way, everyone loses out.

 

I don't see this as "everyone loosing out" but rather a much fairer way for everyone to be provided with a service, as opposed to some people getting something for free off the backs of others, me included. I feel it is morally right that I should pay for a service I am getting (i.e. a bank account) and do not feel that someone else should pay for it for me.

[thegoodsamaritan]

I can tell you honestly that it IS a route banks are considering taking.

 

Says who exactly? Where did you get that information out of curiosity?

Thats exactly what the banks want consumers to think so they think twice about jumping on the the whole "abolish penalty charges" brigade.

 

Banks don't make the majority of their profits from "penalty charges" - they make them (at least in retail) by keeping a good customer base relatively happy and selling loans / credit-cards / mortgages / investments / insurance / packaged accounts etc to them. As has been said on this thread in various guises already if any bank started charging it would quickly lose a large portion of its customer base (and thus its profits). If all banks did this it only takes one to offer free banking to steal a huge portion of market share (And thus profits)

[cazza57]

re: the end of free banking

 

From what I have been reading its NOT us reclaiming our penalty charges which is a drop in the ocean for banks making billions each year BUT the new bankrupcy laws causing this. The problem is the number of people defaulting on loans/mortgages etc is steadily increasing and the number of bankrupcies has increased quite a lot too. And while part of the responsibility lies with us the banks need to take responsibility for their ever increasing lax policies when it comes to credit cards/loans etc which have allowed individuals to have 20 cards at at time! I will not give up my free banking because the banks have been so focused on profit making. Besides as long as one bank/building society has free banking they all will or lose customers.

 

over>

 

caz

[meagain]

What some of the banks might see is that if one of them actually drops their default charges entirely (or sets them at a more reasonble level of £1-£2), they stand to take hundreds of thousands of customers off other banks. You might think initially that they might not be doing this because of a "gentleman's agreement", though on a more practical basis, the only way they would get people to switch is by making the change known, and as soon as they do that, all the other banks would jump on it and do the same thing with the very same effective date.

[Bookworm]

To be fair, i don't think banks would mind losing a lot of their customers - the ones who never have any money in their accounts actually cost the bank money, so if those customers close their accounts, the banks won't care.

 

Er, no.

 

The ones who don't have money in their accounts and don't use them much may cost the bank money, although I'd say more accurately, they don't make the bank as much profit, but the ones in negative numbers not only do not cost the bank any money, they are the milking cows of the industry!

 

If it wasn't the case, the whole issue of reclaiming unlawful charges would not be such a burning one!

[jb79]

It strikes me that there are 2 distinct functions of the banking sector involved here, 1) the cleareance of payments in an efficient manner, 2) The buying and selling (loans etc)

 

Given that we are due to all have ID cards maybe a nationalisation of APACs and shifting the first function of banking into the Public sector would let the banks do what they are really supposed to be doing, Buying and Selling Money, this is the ligitimate profit centre for any bank.

[sazz]

Sorry, just wanted to say hi to GoodSamaritin, nice to see you're still around

[sabo]

Free banking is a misnomer. It is never free because someone, somewhere, has to pay. It's the capitalists way, and what institution could be more capitalist and greedy than a bank? It's generally those in financial difficulty that pay for those that are wealthy, through punative charges.

 

Free banking is for the wealthy, and those with financial accumen! Only the poor and poorly managed accounts (who received financial skills training?) get charged.

 

If accounts are maintained in credit, there are no charges. The banks don't charge YOU for THEIR use of YOUR money. They sit on cheques and transfers for days on end, maximising their profit at your expense, charge £30-40 for an unpaid DD - a system that is fully automated with no human involvement. If my charges letters were to have been hand written on parchment, using a quill, I could equate the charge with the work involved. But to charge these sums for a piece of paper and envelope that never touch a human being until my postman packs it for delivery is CRIMINAL PROFITEERING!

 

The banks attract wealthy customers, provide them with free banking. Who pays for their services? The poor!

 

Free banking - Don't make me laugh.