Sincerity of current accounts
Value illusions within current accounts and their authenticity
“It’s a spreadsheet, sitting on a mainframe somewhere - there is no pile of gold in a vault that is associated with you.” So said Alex Letts, Ffrees’s chief executive, when talking about current accounts. I met Alex a few months back at an event in London. I liked him. He’s direct and to the point without being arrogant. He’s working with Peter Simpson, my old boss. There aren’t that many people working in UK financial services who can know more about current account banking than Peter.
Alex is pulling back the curtain on current accounts. It’s not so much that they’re not what they once were; it’s more that they never were much in the first place. There are lots of ‘value illusions’ in banking but none bigger than current accounts. ‘Free if in credit’ died in the 80’s but was replaced by stealth charges and cross-sell cross-subsidies. Things like overdraft charges and penalties, PPI and ‘packaged banking’ were nothing more than clumsy attempts to replace current account revenues. One by one the Office of Fair Trading (OFT), the Financial Ombudsman Service (FOS) or the Financial Conduct Authority (FCA) has challenged these value illusions and more often than not, found fault. The total cost of PPI redress has now climbed to £24.4 billion. A few years back most of the banks changed the name of their ‘overdraft penalty fees’ to something more like ‘arrangement fees’ in an attempt to re-position them as in some way value-adding. This was nothing more than a rear-guard action. Bit by bit, the banks are trying to re-structure or re-frame these charges in an attempt to justify disproportionate charges.
And it’s not over yet. Just lately, the FCA’s review of the cash savings market (results published in 2015) determined that it is not working well for many consumers. It (the banks) lacks transparency, it’s a hassle to switch, big current account providers are taking advantage of free floats and new customers are still benefitting more than loyal ones. The Competition and Markets Authority (CMA) is investigating current accounts because it’s worried that only five big banks hold 85% of UK current accounts. And it should be worried. There’s little enough evidence that banks will act in the best interests of their customers unless they are legally coerced into doing so.
Today the industry buzz-words are ’sustainable revenues’ (code for money the banks won’t have to give back to customers at some point in the future). And increasingly the banks are using the language of helping people to prosper or helping them to realise their ambitions to describe their raisons d’être. Are they sincere? Last week, in the middle of a negotiation, one of my colleagues was accused of questioning someone’s integrity. He defended himself by asserting that it wasn’t the individual’s integrity he was questioning, it was their sincerity.
I still can’t quite decide whether this amounts to the same thing, but at least it’s a distinction I don’t have to worry about when describing the present transparency of current account banking.