Winners and losers
Who are the winners and losers from today's surprising bank charges ruling from the Supreme Court? Colleagues have been exploring the nuts and bolts of the decision and its implications for customers. But here's a brief economic take.
It's been a good day for the banks, and a bad day for campaigners, and customers hoping for an easy refund. But when it comes to everyone else - the answer's not so clear.
According to the FT, it's "only a black day for those in the red". Banking isn't free, and it never will be. But thanks to Britain's unique free banking model, many of us like to think we enjoy free banking, by keeping in the black, and being savvy enough to shop around.
That's the theory. In practice, the OFT's research says [1.19MB PDF] that more of us pay fees than we might like to think. In a single year, the regulator found that nearly a quarter of all accounts paid a penalty for going overdrawn - and only 6% of customers actually switched banks in search of the best deal. Very few people had any idea of the difference in charging policies between the major banks.
It's not hard to see why the banks like the free banking model - studies suggest that retail banks make more money per customer in the UK than in most of the rest of Europe. A report by the European Commission (referenced on p49 of the OFT's study mentioned above) found that average revenues per customer were the fifth highest in the EU, after Luxembourg, Italy, Austria and Holland.
Many frugal consumers will be glad to see free banking live to fight another day. But if there is one resounding conclusion of the OFT's work in this area, it is that free banking doesn't come cheap.