Customers Still Favour Free Current Accounts
The conglomerate PwC have released a report which shows the vast majority of people approve of free current accounts despite the tacit agreement that they will end up paying a number of ìhidden chargesî as a customer.
Despite the tagline of ìfreeî current accounts, it was shown that around two-thirds of people understand that they will end up paying for this banking service through schemes such as overdraft fees and net credit interest. It was these ìhidden chargesî that largely made up for the £8.1 billion made by banks in 2013 from current accounts.
However, when asked if they would be prepared to pay for their current account in order to expunge these surreptitious payments, 62% said no. Furthermore, over 50% of the people surveyed stated that they would be either ìlikelyî or ìvery likelyî to switch to a different bank if they found that their current firm began to introduce up-front charges.
The PwC argues that free current accounts as a practice are ìunsustainableî and that there is an ìironyî in the fact that the majority of customers understand they are going to have to pay money to the bank in order to fund an account, yet they are unwilling for this to be in up-front fees.
A spokesman for retail banking at PwC, Steve Davies stated: ìThe free current account results in some customers being served at a loss to the bank. A more sustainable approach is that customers are asked to pay a fair price in return for reasonable services, which would reduce the risk of banks seeking to recover these costs by selling other products and services that the customer may not want or need.î
The report was based on the answers of over 2,000 people and confirmed that if people found themselves in a position whereby they had to pay for their current account, they would prefer to make their money back through free overdraft services, a higher rate of fixed interest on the account and the availability of cashback on household bills.
Further to this, of the people polled, 17% would be willing to pay under £5 per month on their current account and 10% said that they would pay £5-10 a month. The group that were willing to be charged £10-20 was 5%, whilst 1% said they would pay in the region £20-40 each month.
The Competition and Markets Authority, who are leading an investigation into the current account market, have cited the topic of free current accounts as one they are looking into. They have suggested that transparency and coherence are integral to a good relationship between the public and the banking industry, particularly on an issue like free banking.
The current account market has become a hot topic in the financial services industry since the consumer group ëWhich?í highlighted the problem many customers have of understanding banking charges and comparing banking firms in order to find out the best deal for them.
Davies also said on this issue: ìThe most likely outcome is the gradual decline of the free-in-credit bank account model. Packaged accounts may gain some ground, but there will also be a move towards tiered pricing and the retention of a very basic free product.î
Moreover, he cited innovation in the banking industry alongside technological companies as a more likely route to solving the problems inherent in the current account marketplace.
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