Money for nothing?
It's not the way UK retail banks would have wanted it, but bank charges are the subject of public debate following a high court judgement last month which threatens to undermine long held charging policies. So what is likely to replace them?
Given the likelihood of increased complexity in products and services, together with the charges associated with them, the demand for independent financial advice is likely to increase markedly as customers, especially in the mass affluence market, seek to best optimise the cost of their financial portfolio to suit their own circumstances.
Underpinning this debate is the simple question: should UK retail banks charge for a service, or per transaction? The former gives the constant revenue stream while the latter provides the greatest customer transparency and control over their charges.
We can make the assumption that UK retail banks will want to continue to use their fee structures both to generate revenue and influence the behaviour of their customers.
They will also look across other markets to see what has been used successfully. Within telecommunications we have seen a mixture of service charges and transaction pricing with a tiered approach deployed. This provides the customer with a choice: a flat charge to use the service extensively, or a per transaction charge in the case of lower usage.
It is most likely a similar approach will be undertaken in the financial services industry. Possibly the greatest challenge for the UK retail banks is going to be defining exactly where those tiers are and how they sell this concept to the public who have enjoyed free banking for nearly 20 years. In this regard understanding the customer and communication of the changes will be the key.
Paul Pullinger is head of UK retail banking for Capgemini and Paul Willis is from the retail banking centre of excellence, Capgemini.