There is no free lunch!

In the 1970s, the UK’s Midland Bank introduced a new competitive service ; “free banking”.

It wasn’t free of course, but it appeared that way.

The idea being that if you stayed in credit, they wouldn’t’ charge you anything.

It was a huge success. So much so that Midland acquired many customers from Barclays, NatWest and Lloyds.

After a few months, the other banks decided they had to do something and followed Midland’s lead‚ just as Midland realized that it was a stupid idea and decided to cancel the whole thing due to the massive losses they were incurring from “free banking”. However, the market had already moved to the model and none of the banks could now retract the offer without both losing market share and the reputational damage that goes with that. Hence, the UK has forever since had so called free banking, where a bank account doesn’t cost anything.

We all know that this isn’t the truth! There is no free lunch! It is an illusion. Even the regulators want to get rid of the “free banking” thing. Why?

Because free banking is a tax on the poor that subsidizes the rich!

In reality “Free banking” is that all other aspects of a deposit account became expensive: loans, credit- and debit cards, bank-transfers, ATM withdrawals, and particularly the unexpected or un-authorized overdraft.

Banking for, or on the poor?

There are many stories of clients ; in particularly the underemployed – becoming overdrawn by £1 and finding charges being levied, sometimes upwards of £100, as a result.

Bear in mind that those who go overdrawn unexpectedly are often those who have the hardest time with money, and you can see why such charges became punitive on the poor.

So it’s a complete myth that banking is free. Customers pay more than £9 billion a year in fees and lost interest on their accounts, and an average credit- or debit card account cost the UK bank clients more than £150 per year. Hidden in all kind of charges and penalties.

So why don’t anybody do anything to change this?

Several reasons, but the main one is that any bank that says it will charge all their customers for deposit accounts feel they are likely to lose significant numbers of customers, market share and get a large amount of negative publicity.

And the idea that if banks charged more for standard banking, they would stop trying to mis-sell other financial products, is completely unfounded and not likely to happen. The banks will just levy the new standard-banking fee and still pay low interest on customers in credit whilst penalizing those in debt.

So how can we ensure, that the efforts from Bank of England, who is trying to eliminate the “Free Banking” illusion and introduce a more fair banking approach, forcing the UK banks to charge every customer for their current account doesn’t just end up in a situation, where the banks just gets a new fee and still overcharge the poor for unauthorized overdrafts, personal loans and credit cards?

Fair banking

You simply introduce a new banking solution targeting the poor or underserved only. A fair banking solution, with a transparent fee-structure, containing no surcharges, no penalty fees or any kind of hidden fees handling this group.

This will leave the rich in the traditional banks, which will be forced to charge for the services provided to that group. They will no longer have a group subsidizing the rich.

Clearly the losers will be the rich and the winners the poor.

Such a banking solution needs to come from the “outside”, as it will not from the heavily employed and old-fashion branch-based traditional high street banks. BigeWallet is exactly this “brush of fresh air” that can rock the boat and create a transparrent fair banking solution for the poor and underserved.