Should we end free banking?

Andrew Bailey, the Bank of England's Executive Director, spoke today on the future of UK banking, and argued that we nede to tackle "the dangerous myth of free in-credit banking".

Bailey told the Westminster Business Forum that:

Free in-credit banking in this country is a dangerous myth. It is a myth because nothing in life is free; rather, it means that we pay for our banking services in ways that are hard to link to the costs of the products we receive. This can distort the supply of banking services. The dangers include that the pricing of banking to consumers varies too much depending on the services they use. I also worry that the banks may not properly understand the costs of products and services they supply. And I worry also that this unclear picture may have encouraged the mis-selling of products that is now causing so much trouble. In short, I think that the reform of retail banking in this country cannot move ahead unless we tackle the issue of free in-credit banking, and have a much better sense of what we are paying for and how we are paying.

Bailey is, of course, right that "free in-credit banking" is a myth. Almost every current account on the market pays zero, or close to zero, interest on accounts in credit, while inflation stands at 3.0 per cent. As a result, if you have a current account, you are in effect paying the bank close to 3 per cent of your deposit each year for the privilege.

It may even be, as Bailey suggests, a dangerous myth. After all, when the amount one is "paying" is contingent on the rate of inflation, it can be very difficult to keep track of what that actually is at any one point; in addition, many people don't have a full understanding of how inflation and interest rates combine, meaning that they do indeed think they are paying nothing at all for the service.

More importantly, the desire to extract extra profit from customers is a large part of what has led to the proliferation and inflation of bank charges. If a bank cannot charge customers a monthly fee for using their account, one way they get around it is by charging a fee for the sort of honest mistake which happens quite regularly; not only fees relating to overdrafts and rejected payments, but also returned letters, mistaken transfers, and suchlike.

But if his diagnosis is correct, I'm not so sure his cure is. While it is true that explicitly charging for accounts will allow banks to charge for their core services, rather than having to make most of their profit at the margin, it doesn't seem so clear that that will lead to better behaviour. Just this year, for instance, the Bank of America, which already charges fees for most services from its accounts such as withdrawals, transfers, and cheque cashing, attempted to introduce a $5 monthly fee for having a debit card.

Banks take advantage of the reluctance of customers to switch by nickle-and-diming on anything they can get away with. While they may find it easier to do so if the charges are less obvious, the last thing they need is state intervention to allow them to charge even more. Let  what little competition there it have the intended effect.

Andrew Bailey (R) presents a giant novelty £10 note to Sarah Darwin. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Show Hide image

Ariana and the Arianators: "We really are like a family"

The pop star provides her fans with a chance to express themselves joyfully - their targeting was grimly predictable.

Ariana Grande’s concert at Manchester Arena on 22 May began like any other. Children and teenagers streamed through the doors wearing pink T-shirts, rubber wristbands and animal ears (one of Grande’s signature looks). They screamed when she came on stage and they sang along with every song. It was only once the music had ended, and the 20,000-strong audience began to leave the venue, that the horror began – with a bomb detonated at the main entrance.

The show was just one date on Grande’s Dangerous Woman tour, which began in Phoenix, Arizona in February, moved across the United States and Europe, and had stops scheduled for South America, Japan, Australia and Hong Kong. (Since the Manchester attack, Grande has suspended the tour indefinitely.)

Since releasing her debut album in 2013, Grande has successfully transitioned from teen idol to fully fledged pop star (all three of her studio albums have sold over a million each) with a combination of baby-faced beauty and Mariah Carey-style, breathy vocals. Her most popular records are bubblegum pop with a Nineties R’n’B influence, a combination also expressed in her fashion choices: Nineties grunge meets pastel pinks.

She entered the limelight at 16 on the children’s TV programme Victorious, which ran on the Nickelodeon channel, pursuing her musical ambitions by performing the show’s soundtracks. Many of the young people who grew up watching her as the red-haired arts student Cat Valentine on Victorious would become fans of her pop career – or, as they call themselves, the Arianators.

As she outgrew her child-star status, Grande’s lyrics became more sexually suggestive. Recent songs such as “Side to Side” and “Everyday” are more explicit than any of her previous hits. She has repeatedly insisted that young women should be able to speak openly about sex and feel empowered, not objectified.

“Expressing sexuality in art is not an invitation for disrespect,” she tweeted in December. “We are not objects or prizes. We are QUEENS.”

Grande also has a reputation as something of a gay icon. She has advertised her records on the gay dating app Grindr, headlined shows at Pride Week in New York, and released a single and a lipstick to raise money for LGBTQ charities.

Cassy, a 19-year-old film student and fan, told me the fanbase is “made mostly of young women from 14-23, but I run into guys and non-binary fans all the time.”

“It’s pretty well known that Ariana has got a LGBTQ+ fan base. She’s so outspoken about it and that’s what draws us to her. Because she’s accepting of everyone, no matter who you are.”

Like many child actresses-turned-pop star, Grande has a fan base skewed towards the young and female: teenage and pre-teen girls are by far the majority of her most dedicated supporters. A writer on the Phoenix New Times described the typical Ariana Grande crowd as “pre-tween, tweens, teens, young gay (and fabulous) men, moms with cat ears, and multiple candidates for father of the year”. The Arianators form tight-knit groups on social media. I spoke to several over Twitter after the attack.

Arena concerts, which often have more relaxed age restrictions than nightlife venues, have long been a safe space for children, young people and teenage girls. They provide a secure place for concert-goers to dress up, experiment, play with burgeoning sexualities, dance, scream and cry: to flirt with an adult life still slightly out of reach. Glitter-streaked tears stream down the unapologetic faces of fans touched by an emotion bigger than themselves. It is appalling, if grimly predictable, to see children, teenage girls and young gay men targeted by agents of regressive ideologies for expressing themselves so joyfully. On 23 May, Isis claimed the attack.

“I went to my very first Ariana concert on 9 April,” Cassy tells me. “It was one of the warmest places I’ve ever been. People were so happy, smiles just beaming from their faces. People were being themselves – if that meant showing up in drag, they did. It was such an amazing place to be.”

Andréa, a 17-year-old fan from France, told me about her first experience of a Grande concert. “It was incredible,” she said. “Everyone was so kind, excited and happy. We really are like a family.”

The fans are devastated by Monday’s bombing. Thousands of messages appeared on social media to commemorate those who lost their lives. “As an Arianator,” Alexandre, aged 16, told me, “I’m really sad and I’m scared.”

“We’re all taking it really hard,” Cassy said. “We’re a family and we lost 22 members of that family last night.”

Ariana began her gig in Manchester with the song that has opened every night of her current tour: “Be Alright”. In it, she repeatedly reassures the crowd, “We’re gonna be all right.” It’s a phrase that her fans are clinging to after the attack. So, too, are the lyrics of “Better Days”, by Grande and her support act Victoria Monét, which was also performed the night of the explosion. “There’s a war right outside our window,” the words go. “I can hear the sirens . . ./I can hear the children crying . . ./I’m hoping for better days . . .”

“It’s hit us all very hard because we’ve lost some of our own,” said one Arianator who runs a popular Twitter account about the tour. “People we interacted with on a daily basis. People that just wanted to have a night of fun. These are dark times, but we are looking forward to better days.”

Anna Leszkiewicz is a pop culture writer at the New Statesman.

This article first appeared in the 25 May 2017 issue of the New Statesman, Why Islamic State targets Britain

0800 7318496