The Hidden Costs of Free Banking


(Bailey Kursar) #1

https://getmondo.co.uk/blog/2015/10/22/the-hidden-costs-of-free-banking/


(lee) #2

I don’t buy this argument and hate that it’s used as an excuse.

The vast majority of people will benefit from free banking and of course people know they get charged for going over.

The big banks of course profit from charges, they could easily stop people going over too if they wanted - some offer it as a chargeable feature (Lloyds & CYBG as examples). The CMA could force them to allow people to choose that as an option.

The lack of people willing to pay for something they get for free isn’t going to change because a challenger bank moans about how difficult it is to compete…Lets not forget that you can actually get paid to bank places now too
Halifax/Bos Reward
Natwest Rewards
Barclays Blue Rewards
Santander 123
Lloyds cash back offers
Etc

Look at Virgin money. Massive brand equity and got a fantastic deal on northern rock assets. It’s launched a basic account years after promising and done nothing but bitch about how we should all pay for banking because we’d all be better off? When really it’s done bugger all to innovate and pretty much squandered its opportunity.

Let’s get one thing straight if we’re gunna start paying for banking rather then get paid then the challenger banks need to have all the features of the current lot have and then some.

Would I consider paying for innovation - Yes but whoever will need to make it above and beyond everything else and the big banks won’t stand still.

Would I support getting rid of free banking? No and the CMA would be better looking at ways to port account numbers and sort codes or to cap charges then waste time making blanket statements.

Build a better bank and they will come. Build a better bank and charge for it and a lot less will come a lot more slowly. Build the same bank and charge for it and why would people bother?


(Tom Chambers) #3

The article also doesn’t mention the more legitimate income from mortgages and similar products that are financed by current account balances - which presumably is how Mondo intends to make it’s money.


#4

They aren’t really - mortgages and lending have no direct or proportional link with account deposits, when banks lend they are really creating ‘new money’ on their books.

Retail banks make the vast majority of their profit from interest on mortgages. Your current account balance is the bank’s asset (where it’s matching liability is the risk of you withdrawing it) and does little more than help their cashflow. I suspect one of the biggest reasons banks want you as a current account holder is so that you one day might lend from them.