HSBC says it could charge for current accounts

I thought this was an interesting article, as a lot of people have in the past complained about Monzo charging for things (cash deposits, withdrawals abroad), or not offering them at all (cheque imaging).

Seeing HSBC say this, one of the big banks is probably a sign of what might start to happen in the future.

Does this mean that Monzo were right to do what they’ve done? Did they actually open up the option for older banks to start charging? :thinking:

2 Likes

No. They did it because they’re a small bank without a branch network nor the breadth of products and services of a traditional bank.

Their premise was an app-based digital bank but they realised not everyone is cashless yet so they had to offer a means for handling cash. That comes with a cost they could not, or would not, absorb in other ways.

HSBC is considering charging due to unprecedented prospect of negative interest rates. No word yet as to whether other proper banks will follow.

4 Likes

This

Europe’s biggest bank, HSBC, has said it could start charging for “basic banking services” in some countries

Followed by this

A spokesman later told the BBC it was committed to continuing to provide free “basic bank accounts” in the UK .

All suggests that the word “could” is doing some heavy lifting here.

It will be a brave bank that takes the first step down this road, but, as The Libertines said, “Never say never, and never say never again.”

7 Likes

Eh, they’ll likely just continue closing branches, reducing ATMs and charging for certain services.

9 Likes

Which most people would probably prefer, to be frank.

Yes, customers do moan if their branch closes, but the average customer banks online and via app, and rarely uses it. It’s probably not a huge loss to the majority.

Whereas every single customer would be annoyed by charges, and they would certainly prefer to keep their account free (even if it cost them in other ways).

(Edited to correct a typo)

6 Likes

Not to the majority, no. My local bank branches all have plenty of customers, though (except TSB - that always seems very quiet).

1 Like

I don’t disagree with you that there are definitely “branch-reliant” customers out there; it’s just that they are a small proportion (a significant, but small proportion) of overall customers.

Clearly, they are also likely to be the more costly customers too. So it makes sense to try to force them online and/or cut costs there, whilst not affecting people who already cost the bank less, relatively speaking.

Therefore, you could recoup enough in costs to potentially not have to charge fees.

It’s tough, but I think that would be the business argument.

1 Like

Basic bank accounts are a specific product type, different to the standard current account held by the vast majority of customers. They’ve said the basic accounts will remain free, but are considering charging for standard current accounts.

The UK is unusual in having “free” banking, but of course there’s no such thing as free.

2 Likes

Basic accounts are the no frills ones, you tend to find it’s the people with a rubbish credit profile who have them, also designed to be used for people on benefits for who a large proportion are out of scope for a standard Bank account. That’s the accounts they’d be committed to keeping free if they do decide to start charging for accounts.

3 Likes

This is going to be really unpopular, but hey…

I think that bank accounts should be chargeable.

Let me explain:

While they’re ‘free’, banks are incentivised to do two things:

  1. load in charges or extra fees, which make comparisons difficult and which are often unexpected and perceived as unfair (such as failed direct debits)
  2. to avoid cost reduction, as the fees they charge cover their costs and more

What would I like to see?

  1. A flat fee for servicing of a current account, including everything except borrowing
  2. A means-tested regulatory scheme so that those that can’t afford to pay can get a free account. I’d structure this so that the bank receives the payment, not the customer, with it being something like the median cost monthly cost of operating an account. That would mean that if a bank is inefficient, then they wouldn’t get enough money to cover their costs, prompting them to increase efficiency. If a bank is super-efficient, then they’d get more profit.
  3. Simple, comparable, tables for extra fees on, for example, overdrafts, overseas card use etc. Or potentially regulatory action to specify what can be charged for outside of the fee.

This would, I think, drive the right behaviours:

  • Customers would judge banks on cost/quality and make a better determination on where to bank
  • Neobanks would have a better chance of success, as their lower cost bases would (in theory) give them the ability to price lower

I know this is contentious and I like a free current account as much as anyone else. But there might be a better way of increasing competition in the market and reducing some of the harms - there’s a disproportionate (regressive) impact on the poorest with the current fee structure, for example. None of this will be the absolute right approach - but I feel it’s worth debating.

3 Likes

There’s not much to stop them doing the above and charging a fee, though.

5 Likes

I suppose my argument would be that fees only come with tighter regulation. Lots of detail to be worked out…

1 Like

Thinking about it further, I would be against banks charging for running an account in general, but I’d not have a problem with banks having a fair fee structure.

For instance, Monzo charge fees to certain customers who don’t fit a criteria. I’m not against banks in general saying something along the lines of:

if in any month you don’t have a salary or benefits paid in, or you don’t have direct debits going out or make a certain number of card transactions, we’ll levy a fee of £5.

It would discourage people from using CASS just to get a sign up bonus and leaving the account dormant until the next bonus comes along, and would allow everyone (or nearly everyone) to have one free bank account.

1 Like

Ironic that Midland Bank kicked off the free banking era back in the ‘80s.

I’m sure there’s nothing more the high street banks would love than to be able to introduce a fee for running a bank account. But as we saw with the regulation of overdraft fees, they’ll find a way to stick you for everything on top of £12 a month just for having the account.

I’d would have been inclined to agree with you, though, about charging for the service being fair in principle, a few years ago, had not Starling shown up to prove current accounts aren’t inherently loss-leading. It has even managed to keep overseas ATM use free. That’s a hell of a model, one which even Monzo couldn’t achieve.

3 Likes

As soon as this happens, banks will just care about increasing fees to fill their pockets for not doing anything and the service will go down the hill. They will still firing people and closing branches.

1 Like

Good move. Will close dormant accounts

I had a prepaid card years ago. They wrote last month that they were introducing a charge, and the only way to avoid it was to close my account. Naturally, I closed it, and discovered that I had £30 balance which was returned to me. Result.

4 Likes

The problem with closing accounts is sometimes they can impact your credit file. I have a Lloyds account and I don’t use it but would be mad to close it, since I’ve had the account since I was 12.

Regarding charging for an account, while like others I would prefer it to be free. I’m not entirely troubled by the thought of paying a small fee if it would bring about other changes e.g. reduced overdraft costs etc.

It would be a brave decision by any of the main stream banks to do so, but I would imagine they would all quickly follow.

1 Like