David Prosser's Outlook: Another free lunch from the banks
Wednesday 28 May 2008
One by one, those neat little tricks through which banks have quietly prospered are being closed down. First it was unauthorised borrowing charges that faced the wrath of regulators. Now the industry has been forced to offer customers a better deal on electronic payments clearing too, spelling the end of a system that once earned it tens of millions of pounds a year, according to the Office of Fair Trading.
Electronic payments, including standing orders, will now take just a couple of hours to clear, rather than several days as in the past. The central clearing system underpinning this pledge from leading banks went live yesterday, though it won't be until next year that the majority of customers are fully migrated on to it.
One of the interesting features of this new improved clearing system is that banks have decided not to charge personal customers for it (though business customers may have to pay), despite an estimated implementation cost of £300m.
Though free banking is something of a sacred cow in this country, one could imagine how some banks might have made a case for charging for same-day transfers. They might, for example, have offered customers access to previous clearing deadlines for no charge, but imposed fees on those who want to use the faster system.
That the banks have not felt able to head down this route tells us something about the competitive nature of the current account market. Not a single provider is feeling brave enough to make a charge for a new service, despite the cost of introducing it and the loss (albeit modest) of revenue caused by dropping the status quo on clearing.
The point will not be lost on bank-charge campaigners, who have repeatedly been told that their battle on unauthorised borrowing fees threatens the very concept of free banking.
Equally, however, the sector's critics should be prepared to give credit where credit is due for this new improved system. Though it has taken some years to get to this stage – and though consumer groups don't like its phased introduction – current account customers are once again getting something for nothing from their banks. Long may it continue.
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