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Competition in Banking

Competition in banking – advantageous for the banks’ customers?

In response to this article by John Kay published in the Financial Times, I would agree that it is not yet a freely competitive market in the UK retail banking landscape, but would contest the assertion that competition adversely affects the banks’ customers.

It is too early to tell the potential benefits or disadvantages that the introduction of challenger banks will pose to customers, until we see diversification across the space.

For example, rather than an inertia towards switching banks for a better deal or experience, evidence showing the success Santander’s 1,2,3 account has had in drawing in customers, suggests customers have responded well to having greater choice.

One manner in which banks are suggested to have damaged their customers whilst striving to maintain an edge against the competition, is the mis-selling of PPI.  When it is properly priced and sold to customers in the right context PPI is a good levitra product.  Have we moved too far away from the customer taking responsibility for what they are buying?

The seminal issue raised here is the concept of ‘free banking’.  It would be a brave step for a bank to take the first maiden voyage into introducing purely ‘fee-only’ accounts and eliminate free current accounts, but wouldn’t the ability to charge transparently for basic banking services provide the competition the industry so badly needs?

Read the Full Financial Times Article by John Kay on his blog here

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