Turner condemns 'free banking' - must have been listening to me, and then later in the article reverts to type and talks bollocks. See here
Put On Your Big Boy Pants, Maybe?
2 hours ago
Thursday, 13 January 2011
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8 comments:
From the article: "It is the case that free-if-in-credit banking does create a bit of a barrier to new entrants. "The current account ... is essentially a loss-leader ..."
Probably true, but the canny depositor takes the 'free' banking with one hand and tells the cross selling vultures to f- off with the other. And makes sure he never goes overdrawn, which is not rocket science.
As to new entrants, the bulk of UK bank's income is the interest rate spread, which has increased from £40 bn p.a. pre-crunch to £60 bn p.a. nowadays (and the existing banks have ongoing loan losses to contend with).
So whether the 'free banking' is subsidised by cross-selling or by paying slightly lower interest rates is neither here nor, and a new entrant, even without this cross-sellign nonsense has a head start because he can share in that juicy £60 billion easy money without having to worry about loan losses.
I've always assumed that the twerp isn't really called "Adair" and today I googled him - he's really a Jonathan. He's a bit of a Nowhere Man: "He grew up in Crawley and East Kilbride....".
But the finest bit is the deadpan "..he married Orna Ní Chionna, whom he met at McKinsey. She comes from Ireland, and was born c. 1956."
MW - Agree you analysis, but...
'Free' banking is not subsidised by cross selling very much. Most of the cross selling of investment products ends up being nil gain for the bank (lots fall over and lots result in redress payments - talking to an ex-Barclays Wealth bloke about this yesterday). Most free banking is subsidised by penalty charges. Now, that maybe OK for me and you, but when you live on the edge of financial meltdown, and you are forced into the banking system, as in away from the cash system, charges become a very real problem.
"when you live on the edge of financial meltdown, and you are forced into the banking system, as in away from the cash system,"
do you really want to pay for your current account?
The financially incompetent will always suffer for their incompetence, regardless of what system is in place.
"do you really want to pay for your current account?"
Do already but it comes with bonuses. Those accounts can be profitable for the bank even though they are giving you something in return for the monthly charge, similar to how employers providing certain things as a benefit in kind is cheaper than the employees trying to source them on an individual basis.
"The financially incompetent will always suffer for their incompetence, regardless of what system is in place.".
I agree with you on this though.
The financially incompetent will always suffer for their incompetence, regardless of what system is in place.
No. I did not mean the spendthrift or incompetent. I mean those on low incomes, often also on benefits who are forced into the bank system by DD demands by utilities, benefit payments by DD etc etc. Timing these things is often very difficult and time consuming and not everyone is as menatally strog as we (?) are. They get charged lots by this system. They'd be better with cash in jamjars on the shelf. The move away from cash is a problem for marginal people. Look, I am no softy lefty at all, but I've seen this come through my door in my business - someone on benefits, maybe disabled, who ends up with 200 quids of charges that wipe out her benefits, so she can never recover. I seem to recall that some rule or other does not permit banks to levy charges on benefits, but they do, because they levy it on the next transaction although it is often the benefit payment that is late.
And I also people who have lived on benefits who mange very well, but usually they are enterprising enough to have 'other income' - mostly these have been abandoned mothers. (Us blokes eh? Useless).
It's a minority of customers that get charged that subsidise everyone else. It's wrong.
L, as to the low paid/those on benefits, this is all in the MW manifesto.
People can get much cheaper electricity, water etc if they pay by DD, therefore they need a bank account. So banks will be cordially invited to offer basic bank accounts for these people, which do NOT allow overdrafts and which will not levy anything but nominal charges for stopped payments etc.
So your Citizen's Income will be paid in on the first of the month minus LVT or council house rent, and all your DDs will be debited five minutes later and then what you are left with is yours to spend.
MW - Persackerly. It used to be done by the post office. Currently banks are forced to provide 'basic accounts' and they hate it because it costs them money. Doing it your way (with which you probably know I already agree) would be better.
And when we're running it, and because everything will be so very much simpler, CI payment WILL arrive on time, and the DD's WILL NOT go ut until it has arrived (force majeur clause).
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