The end of free banking could be an opportunity for other financial institutions

Building societies and credit unions stand to benefit if we move towards a paid-for model.

While many of us start to recover from the shock revelation that charge-free bank accounts are a myth, and that banks have been incentivised to mis-sell other financial products for their loss-leaders, some financial institutions like building societies and credit unions are quietly looking forward to the end of free banking.

After the scandals that have hit banks over PPI misselling and the £9bn set aside to recompensate those who were its victims, bankers and regulators have shared a rare platform in agreeing that an end to free banking could prevent similar future episodes.

The argument goes that banks were only scheming because fees aren't being levelled towards customers for their accounts, and so inevitably it became necessary to cross-subsidise from one profitable bit of the operation to in-credit personal current accounts free of charge.

Indeed as the newly-appointed chairman of Barclays, Sir David Walker, has said: "Because banks are not charging, it drives them inexorably into this sort of position”.

The issue has been raised in parliament and will be raised again at the Parliamentary Commission on Banking Standards where bankers have already submitted evidence, highlighting free banking as one of the things that led to bad behaviour.

One of the practical problems that awaits this (some call it an inevitability) is if one bank makes the leap and starts charging, the likelihood is that their customers will run and go elsewhere. To be a renegade over this can promise a huge money loss, which undermines the point in doing it in the first place - some risks just don't come naturally to banks.

Of course the other problem is that if it became a trend among banks, nobody can promise against an outbreak in customer dissatisfaction. One of the concerns being raised is that for unethical banking, the general public is being asked to subsidise another income stream for Barclays, HSBC, RBS and Lloyds.

For Phillip Inman, economics correspondant of the Guardian and the Observer, this is like a pickpocket saying he was forced to steal wallets because he was denied other sources of income. The only way of stopping a naughty banker from selling you stuff you don't need, in other words, is by giving him money. One can understand the discontent at this twisted logic.

But from another angle some institutions are seeing an opportunity. While one of the appealing planks of David Cameron's big society was the building up of smaller financial institutions, realists could see the many market entry barriers for types like building socieities and credit unions.

While the mainstream is already occupied by big banks, it was discussed at the KPMG’s 22nd annual Building Societies Database recently that: “almost half of the UK’s 47 financial mutuals had increased their profit in the year to April 2012, and that they would benefit further from the end of free banking.”

This isn't the first time I've heard something similar. Speaking to someone recently who works close to the credit union industry, who preferred to go unidentified, they told me that Barclays' talk of transparent charging structures has made the prospect of credit union modernisation very interesting indeed.

Credit unions have always had such a structure, and if paid-for accounts led to more competition among smaller players then the notion of a credit union membership rise increases the chance of them lending more money, particularly to those who are currently having difficulties remaining creditworthy or are thinking about going to a payday lender.

Trouble is the paid-for model comes with many problems. Too many, perhaps. People don't want to be charged a fee. Customers may end up kicking up a fuss about who their banks lend to on the grounds that their fees subsidise them, which when trying to maintain an image of middle-class respectability, may see the number of creditworthy people diminish.

Though most of us do want more competition and for places like credit unions to have more relevance in the market. Some very complex conversations and arguments are going to be had over this subject, that much is for sure, but it is interesting to note that advocates for an end to free banking are not only the usual suspects alone.

A high street bank. Photograph: Getty Images

Carl Packman is a writer, researcher and blogger. He is the author of the forthcoming book Loan Sharks to be released by Searching Finance. He has previously published in the Guardian, Tribune Magazine, The Philosopher's Magazine and the International Journal for Žižek Studies.
 

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I can’t follow Marie Kondo's advice – even an empty Wotsits packet “sparks joy” in me

I thought I’d give her loopy, OCD theories a go, but when I held up an empty Wotsits bag I was suffused with so many happy memories of the time we’d spent together that I couldn’t bear to throw it away.

I have been brooding lately on the Japanese tidying freak Marie Kondo. (I forgot her name so I typed “Japanese tidying freak” into Google, and it was a great help.) The “Japanese” bit is excusable in this context, and explains a bit, as I gather Japan is more on the case with the whole “being tidy” thing than Britain, but still.

Apart from telling us that we need to take an enormous amount of care, to the point where we perform origami when we fold our underpants, which is pretty much where she lost me, she advises us to throw away anything that does not, when you hold it, “spark joy”. Perhaps I have too much joy in my life. I thought I’d give her loopy, OCD theories a go, but when I held up an empty Wotsits bag I was suffused with so many happy memories of the time we’d spent together that I couldn’t bear to throw it away.

After a while I gave up on this because I was getting a bit too happy with all the memories, so then I thought to myself, about her: “This is someone who isn’t getting laid enough,” and then I decided that was a crude and ungallant thought, and besides, who am I to wag the finger? At least if she invites someone to her bedroom no one is going to run screaming from it, as they would if I invited anyone to my boudoir. (Etym: from the French “bouder”, to sulk. How very apt in my case.) Marie Kondo – should bizarre circumstance ever conspire to bring her to the threshold – would run screaming from the Hovel before she’d even alighted the stairs from the front door.

I contemplate my bedroom. As I write, the cleaning lady is in it. To say that I have to spend half an hour cleaning out empty Wotsits packets, and indeed wotnot, before I let her in there should give you some idea of how shameful it has got. And even then I have to pay her to do so.

A girlfriend who used to be referred to often in these pages, though I think the term should be a rather less flippant one than “girlfriend”, managed to get round my natural messiness problem by inventing a game called “keep or chuck”.

She even made up a theme song for it, to the tune from the old Spiderman TV show. She would show me some object, which was not really rubbish, but usually a book (it may not surprise you to learn that it is the piles of books that cause most of the clutter here), and say, “Keep or chuck?” in the manner of a high-speed game show host. At one point I vacillated and so she then pointed at herself and said, “Keep or chuck?” I got the message.

These days the chances of a woman getting into the bedroom are remote. For one thing, you can’t just walk down the street and whistle for one much as one would hail a cab, although my daughter is often baffled by my ability to attract females, and suspects I have some kind of “mind ray”. Well, if I ever did it’s on the blink now, and not only that – right now, I’m not even particularly bothered that it’s on the blink. Because, for another thing, I would frankly not care to inflict myself upon anyone else at the moment.

It was all a bit of a giggle eight years ago, when I was wheeled out of the family home and left to my own devices. Of course, when I say “a bit of a giggle”, I mean “terrifying and miserable”, but I had rather fewer miles on the clock than I do now, and a man can, I think, get away with a little bit more scampish behaviour, and entertain a few more illusions about the future and his own plausibility as a character, when he is squarely in his mid-forties than when he is approaching, at speed, his middle fifties.

Death has rather a lot to do with it, I suppose. I had not actually seen, or touched, a dead body until I saw, and touched, my own father’s a few weeks ago. That’s what turns an abstract into a concrete reality. You finally put that to one side and gird up your loins – and then bloody David Bowie snuffs it, and you find yourself watching the videos for “Blackstar” and “Lazarus” over and over again, and reach the inescapable conclusion that death is not only incredibly unpleasant, it is also remorseless and very much nearer than you think.

And would you, dear reader, want to be involved with anyone who kept thinking along those lines? I mean, even if he learned how to fold his undercrackers into an upright cylinder, like a napkin at a fancy restaurant, before putting them in his drawer? When he doesn’t even have a drawer?

Nicholas Lezard is a literary critic for the Guardian and also writes for the Independent. He writes the Down and Out in London column for the New Statesman.

This article first appeared in the 05 February 2015 issue of the New Statesman, Putin's war