The incoming head of the financial regulator has taken customers and their banks to task for perpetuating the myth of free banking as discussed in this BBC Business Article. Andrew Bailey says banks
need to tear away the curtain and reveal the hidden costs of everyday banking.
Transparency is laudable but it will be extremely hard for banks to make such disclosures. And what of the cost of actually calculating those costs and what should banks and customers do with them?
Bailey acknowledges the difficulties of a bank openly charging for current accounts. Which banker or shareholder (in many cases the taxpayer) would think it was a good idea to be the first to adopt a marketing model that’ll encourage customers to switch
accounts. The only way it could happen is if the regulator mandated an end of “free bank banking”. Is that really a vote winner?
However, coming into office with a debate about hidden costs is relevant for the industry because the cost to do the business of banking is large and – in some respects – is getting larger. A key cost is the complexity of systems and processes that ironically
has come about from the need to respond to dynamic market conditions, new channels of communication and compliance with ever heavier rafts of regulation and external scrutiny.
Given Bailey’s call for change it is hard to imagine them actually happening, the real job for the banks lies in bringing these operational costs under control. While not very headline catching, the strategies to simplify and reinvigorate back office and
customer facing systems are as transformative, if not more transformative, and exciting in their scope and implications as the marketing and compliance initiatives.