Is M&S’s decision to offer current accounts for a fee a sign that no-charge banking is dying?


Stephen Whitehouse

“Free banking” in the UK is nearing an end. Regulators view the current banking model as unfair to consumers and might well force the end of the UK phenomenon of free in-credit banking. Our research suggests that customers are willing to pay for services that add real and lasting value to their lives, like digital banking. However, customers are unlikely to choose to pay for services that they presently see as free. It is unclear whether customers understand how they are charged for “free banking”, so there may be a case for educating the public on hidden account charges. Banks are finding it difficult to maintain free current accounts due to the low interest rate environment but are unlikely to risk losing customers by being the first to introduce charges. However, banks will need to begin investing in new current account services – with fees – to capture new revenues.

Stephen Whitehouse is a financial services partner at PwC.


Malcolm Hurlston

When the Co-op Bank introduced free banking in 1974, it was aiming mainly at competitive advantage and it worked. The major banks took 11 years to catch up. But a secondary reason was the desire to be attuned to customers and the research showed that customers felt banking should be free. Now M&S is restoring clarity and the next step could well be the end of free credit cards, which distort the market in favour of the well-off and well-organised. In theory consumers should benefit from more transparency and banks will jump at the opportunity to charge. However, in rude practice this will not mean the end of free. Many consumers prefer to be complicit in their own deceit and the market will serve them too. We shall see a range of products bundled and unbundled, and consumers can balance the drive of their psyche with the call of common sense.

Malcolm Hurlston launched free banking for Lord Thomas at the Co-operative Bank.