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17 Jan 2021

Go Direct News

Is this the beginning of the end for free banking?

Andrew Hagger, Head of News and Press at moneyfacts.co.uk, looks at the decision by First Direct to introduce monthly fees to customers who don’t meet their revised criteria, and whether this is just the tip of the iceberg when it comes to customers having to pay for their current accounts.

“First Direct has a reputation within the banking industry for its high levels of customer satisfaction. By operating via telephone and internet channels, it doesn’t have the service issues associated with running retail outlets on the high street.

“For the 15% of customers (approx 195,000 people) that First Direct estimates will be impacted by the new funding requirements, it will be interesting to see how many are prepared to make First Direct their primary bank, or are prepared to pay the monthly fee in order to continue to receive a good level of service.

“The other option of course is to close your account and transfer it to another provider, but it is surely only a matter of time before other banks and building societies introduce a similar charging structure, so you could be back to square one and potentially paying a monthly fee and be faced with poorer customer service.

“Customers have been somewhat lethargic in switching current accounts in the past, purely on the basis of interest rates on competitor products. However, when monthly charging and customer service levels are thrown into the equation, will these factors be the catalyst to make them vote with their feet?

“This move from First Direct is no real surprise, especially when only just over three months ago, Dyfrig John, Chief Executive of HSBC, hinted that a general move towards annual fees was “inevitable” when he was reporting on their first half profits.

“UK banks have struggled to make decent returns from their retail banking operations, and if the OFT investigation into penalty fees results in fee capping similar to that seen in the credit card market, it will be no surprise to see the banks looking for ways to recoup revenue by other means.”





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