PwC: Current account fees are the future

Published at 00:01 AM on 02 February 2015

Current account customers may not want to pay for their accounts, but the free banking model is unsustainable and may increase the likelihood of mis-selling in the future, according to PwC’s latest report, There’s no such thing as a free lunch: Why fees are the future for current accounts, published today. 

The report, based on analysis of a UK survey of over 2,000 people, reveals that while a clear majority (66%) are aware of hidden current account charges, one in two customers would be likely to change bank if an upfront fee is introduced instead.  Additionally, nearly two thirds (62%) of customers say they are not prepared to pay anything upfront for their current accounts and 27% would not pay more than £10 a month.

Steve Davies, retail banking leader at PwC, commented:

“Compared to other countries, the UK is an anomaly with the “free banking” model it has adopted for personal current accounts.  In other countries, customers expect to pay directly for current accounts in some way, such as ATM charges and monthly fees.  As many of us know, UK current accounts are not free at all and are paid for through overdraft charges, penalty fees and uncompetitive or zero rates of interest.

“The irony is that most customers understand the unspoken bargain operating here and prefer it to paying an upfront fee.  However, the free current account results in some customers being served at a loss to the bank.  A more sustainable approach is that customers are asked to pay a fair price in return for reasonable services, which would reduce the risk of banks seeking to recover these costs by selling other products and services that the customer may not want or need.  We can trace the history of this problem through the various mis-selling scandals in the industry over the last decade.

“The free banking model stifles innovation and competition in the current account market.  It requires new challenger banks to achieve scale very quickly if they are to survive and it fails to reward banks that come up with new ideas as costs cannot be recovered.”

Table 1 reveals that there is demand for many of the features which are or could be offered as part of a fee paying or packaged current account.

Table 1: What services customers want from a paid-for current account

If you had a current account you had to pay for, which services would you most want included?

Cash back on household bill payments


Free overdraft facilities


A higher fixed rate of interest for the life of the account


Travel insurance


Motor breakdown cover


Commission free cash withdrawals overseas


Mobile insurance


None of these or don’t know


Preferential discount rates on retail or entertainment spending


However, Table 2 reveals problems with the idea that packaged accounts might offer the industry a way to move away from the free banking model - the amount people are willing to pay is less than the cost of  packaged accounts.

Table 2: What customers will pay for banking

How much would you be willing to pay up front for your current account?

Nothing at all


Less than £5 a month


Between £5 and £10 a month


Between £10 and £20 a month


Between £20 and £40 a month


More than £40 a month


Don’t know



Is there a solution?

Steve Davies, retail banking leader at PwC, concluded:

“This issue goes to the heart of the matter of trust.  Banks and their customers should be expected to enter into a fair bargain for these services.  We should expect banks to get a reasonable, but not excessive, return for offering a good and essential service in a consistent manner. The banking industry needs to move towards a more transparent way of charging.

“In the short term, it is difficult to see how an individual bank would remove its free banking product – the risk of being left on its own would expose them to the high risk of losing customers and business. 

“It is possible that the regulator could intervene and there could be some merit in exploring how the transparency between the advice and cost aspect of the Retail Distribution Review could work for the current account market as it did for the financial advice market.  However, despite the principles and benefits, it seems unlikely that regulators will intervene, not least due to the overwhelming customer sentiment on the subject, as noted by our survey.

“Better transparency between service, costs and fees can only help to address the trust challenge, and the most likely outcome is the gradual decline of the free-if-in-credit bank account model.  Packaged accounts may gain some ground, but there will also be a move towards tiered pricing and the retention of a very basic free product.  We are also likely to see innovative new digital models that challenge the current account approach which may come from technology companies, mobile providers, payments companies or a combination of these.”



Notes to editor:

Download There's no such thing as a free lunch





Media contact:

Katherine Howbrook, PwC media relations, Tel: 020 7212 2711, Email: [email protected]



As part of PwC’s financial services practice, the Financial Services Risk and Regulation (FSRR) practice of over 1000 people helps clients across the financial services sector to:

  • Stay alert to financial and regulatory risks
  • Adapt their business and culture
  • Protect their customer and reputation in the event of issues such as technical difficulties, operational failure or cyber attacks
  • Repair damage they may suffer from process or product failure

 For more information visit



About PwC

At PwC, our purpose is to build trust in society and solve important problems. We’re a network of firms in 157 countries with more than 208,000 people who are committed to delivering quality in assurance, advisory and tax services. Find out more and tell us what matters to you by visiting us at

PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see for further details. © 2016 PwC. All rights reserved

« Europe’s loan portfolio market to top €100bn in 2015 | Homepage | Markit/CIPS UK manufacturing PMI: Manufacturers face a pricing conundrum »

  • Contact us
  • +44 (0) 20 7213 1768

Specific and out of hours contacts