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Bangor Academic wins award to research the current account market

The real cost of ‘free’ current account banking services will come under greater scrutiny in a new research study by Bangor Business School. Dr John Ashton, a senior lecturer in banking, has been awarded a £25,000 grant from the Friends Provident Charitable Foundation to determine what are the costs of ‘free’ current account use, particularly for customers viewed as more vulnerable or poorly-informed about financial services. The project is to be undertaken with collaboration from North Wales Credit Union.  

Commenting on the award, Dr John Ashton stated: “despite their ubiquity of use, the cost of using current accounts is poorly understood”.  This is particularly the case in the UK where these services are offered as ‘free’ in many cases. Indeed, the scale of current account costs for different customers is often obfuscated by nature of these ‘bundled’ financial services, which include deposit, overdraft and payment services. Allowing greater understanding of how much these ‘free’ current account services actually cost different types of customer is useful for customer decision making.  

The project will determine the level of these cross-subsidies from deposit and overdraft services to payment services, and enable to cost of ‘free’ banking to be determined. As current account costs vary with use, a range of customer profiles will be determined, in association with the North Wales Credit Union, consistent with the current account use by customers viewed as more vulnerable or poorly-informed about financial services. Assessment of this market is important as these services are used by 90% of the UK population, allow individuals to access the monetary economy, and provide the first step towards building a financial identity advancing family well-being, financial stability and security and ultimately economic development. The work will be undertaken in association with Prof. Robert Hudson at Newcastle University. 

Publication date: 3 February 2012