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How will the future fee free bank account system work?

Yesterday we saw Santander announce the introduction of a fee free bank account for Abbey, Bradford & Bingley and Alliance & Leicester mortgage holders but will this create a sea-change in the UK banking sector?

While the fee free bank account to be introduced by Santander was well received in the marketplace, many believe that to all intents and purposes this is nothing but a marketing ploy. There is no way that any UK bank will give up its fee income without at least clawing-back some of the lost income in other areas of its operations. Even though the overdraft interest rate for the Santander bank account was quoted at 12.9%, very competitive to say the least, this is not to say it will remain at this level for ever and a day.

If you take a step back, Santander will be looking to increase its mortgage exposure by offering this fee free account and is likely to make significant profits from additional mortgage arrangements. If you were a shareholder in Santander, or one of the other UK banking institutions, would you be happy to see your company give up millions of pounds of income a year without attempting to at least claw back some of the lost income in other areas of the business?

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