What the end to “free” current accounts could mean for the future of retail banking in the UK

Guest blog post by Rachel Nash, NCR's director of financial services for the UK, Ireland and the Nordics

Banks could be forced by the regulator to introduce charges for basic current accounts according to recent media reports. The move would aim at ending the practice of subsidising “free” banking for those in credit through overdraft charges for those who are not, in addition to fees for withdrawing and spending cash abroad and low interest rates on current account balances. Already we’ve seen customer attrition rates surge in the UK from 16 per cent in 2010 to 35 per cent in 2011 and to 41 per cent in 2012, according to the latest survey by Ernst & Young. Some 48 per cent of Britons switched accounts due to high fees. This trend is likely to continue in light of ongoing competitive and regulatory pressures.

Next year consumers will start to receive an annual statement explaining the interest they’ve missed out in their current accounts by not moving it into a higher interest savings product, putting into force recommendations by the UK government’s Independent Commission on Banking. With increased levels of transparency, consumers will be better empowered to make choices about what sort of banking services will meet their needs.

Banks are responding by looking for new ways to boost service and sales levels. Significantly, over a third of Britons (35 per cent) questioned by Ernst & Young cited a poor branch experience as the main reason for changing accounts. This underlines the need to reinvent a new role for their branches in terms of their location, opening hours, staffing strategy and the availability of self-service touchpoints to improve the overall experience of a visit. Branches are still critical to rebuilding trust, putting a human face to a bank’s brand and remain the single most popular channel for consumers to make purchasing decisions. 

Banks are looking to improve the availability specialist staff, trained for the sale of mortgages, pensions or investments. Online appointment schedulers enable consumers to see the real-time availability of advisors across multiple locations and make instant appointments. One major North American bank using online appointment scheduling has found that wait times have been halved and product sales increase by 25 per cent. Video conferencing could also be used to enable advisors in contact centres to serve consumers in multiple locations.

Consumers want the flexibility to shape their relationship with their bank – interacting with them whenever and however they choose. Banks need to move towards a fully integrated banking experience that combines the advantages of physical branches and in-person interactions with information-rich mobile and online channels to make it easier for consumers to manage their money. This will help banks meet consumer demand for great value products and a great banking experience too.