News & Views - Savantor

To charge or not to charge?

Sunday, 09 November 2014
It is said that in the UK, people are more likely to change their partner than their bank account. The vast majority of the general public, due primarily to a combination of apathy and uncertainty, are content to stay with one bank for their current account irrespective of the value of the service they receive. A preliminary review undertaken by the recently formed Competition and Markets Authority found that there is not enough competition in the market for personal accounts and business loans, and that a sweeping investigation would be conducted over the next 18 months. The hold of the 'big four' banks - Barclays, Lloyds, HSBC and RBS - on the market will be specifically under review, particularly in relation to transparency of charging and barriers to new entrants to the banking market. Predictably the big four are not much in favour of this investigation, whilst it is keenly supported by the new challenger banks such as Virgin and Tesco. The area of 'free' banking is likely to be subject to in-depth consideration, as it seen by new banks as one of the key areas of difficulty in breaking into the market, with the bigger banks able to 'hide' the cost of running free accounts from customers with a myriad of other charges. It is however not such a simplistic task to be able to compare bank accounts across the board, with one of the most significant factors affecting choice the actual requirements of the customer. For some, a no-frills bank account is all they are looking for, whilst others need a more comprehensive service not necessarily supported by the feature 'bundles' offered for many fee charging accounts today. There is also the widespread popular belief to be counteracted that current accounts should be 'free', although of course in practice what this means is that a bank looks for other ways to pay for the account. It seems likely that the outcome of the investigation will enforce a number of changes onto the retail banking market, with the intention of removing the current opacity of charges and allowing consumers to make informed decisions about their choice of bank. Whether or not the average consumer makes full use of any new changes will remain to be seen. After all, aren't bank accounts supposed to be free......?
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