Free banking could become extinct
- 27TH MAY 2007
The bosses of major banks in the UK have faced many stressful months, agonising over where they will generate their profits from in the coming years as a result of the ongoing investigations into payment protection insurance (PPI).
The Financial Services Authority began investigating the sale of payment protection insurance in 2006 and have since fined several providers and bought in new regulations to try and make the industry more consumer-friendly.
As a result, banks will have to adhere to tighter regulations when it comes to payment protection insurance and may well lose a significant chunk of their profits. In relation to how many claims were made, very few were actually paid, thus leaving a good amount of the revenue for the shareholders. As this source of revenue will now dissipate, banks need to make their money elsewhere and the first source on the list is banking.
At the moment, most banks offer free accounts, but the UK is one of the only places of the world that offer that privilege. Charging for banking services would bring them in line with the rest of the world but it would also alienate consumers further.
Some banks have already introduced accounts that require payment of a monthly fee but more will almost certainly follow. Ironically, this need to generate revenue has increased the need for payment protection insurance.
There are alternative to banks though. Standalone policies from the likes of protection specialist British Insurance will offer comprehensive and ethical protection should you ever find yourself out of work and unable to pay your debts. You cannot afford to be without that peace of mind in the current climate.
