There's a debate to be had about "no such thing as free banking" - I'm very familiar with the world of prepay in the UK and retail banking practice is a big headwind here.
The big deal in the UK, a few years ago, was that a person would go overdrawn, deposit money to cover it immediately but then get charged an overdraft fee by an overnight process. This fee would put them overdrawn, leaving them liable for a second overdraft fee - which would be charged the next night...
This was ruled to be illegal and banks had to set up whole departments to process return claims. I suspect this is the main cause of the big headwind.
It was slightly more insidious than that - they were processing debits before credits, and charging a fee for insufficient funds if your balance dipped below zero (or below your overdraft limit) in the process:
Also, when you had a bunch of outgoing positions a day, they (used to?) ordered them from biggest to smallest, thus hitting you with the maximum number of overdrawn transactions.
They also charged a fee for standing orders that didn't go through because of limited funds in your account. Instead of just ignoring them.
They have to make money somewhere. If it's free checking account, then maybe the account interest is low, or maybe the connected credit cards have high interest, or maybe they do a hard push on loans, or... Basically banks are not charities - in the best case, the everyday banking is simply a loss leader for something else.
In principle I agree, that makes sense. In practice, we've had freeish banking for decades in the Netherlands and it's excellent. Further the other services are all decent, too, there's no real push on loans or creditcards. Mortgages are popular but the rates are very sensible (such that it's cheaper than renting atm, even disregarding the capital gains on your home). Below a short overview.
I was flabbergasted to hear about overdraft fees when I first saw them feature in social justice documentaries (e.g. Spent: looking for change).
My interest is low, but that's normal in 2016. .5% to .9%
Any CC payment I make is deducted from my checking acc 30 days later, no interest. It's essentially a normal debit card with 1 month free credit. After that it's 12-14% interest per year. That's very high of course, but it's not exploitative like a payday scheme. Further, keeping CC debt is quite uncommon here. And I can borrow up to $25k at 8.9% say for buying a car. That's pretty steep but not high compared to other countries, it's also not a very popular product. Mortgage interest is currently 2.9% fixed for 30 years.
As for my bank account, I pay about $15 a year for it. There's no costs to depositing or withdrawing money, putting it in or taking it out of a savings account. I mostly bank via an app on my phone, and payments arrive in minutes or hours. I don't pay anything for the shared acc with my gf either. For the CC I pay an extra $15 per year or so I think.
Now if this was a new startup in a growth phase where it's burning cash and offering free services, sure, but this bank was founded in the 1880s and has had roughly this pricing scheme as long as I can remember.
All in all I think I've paid maybe $250 for all by banking in the past 10 years.
Rapidly? Slow constant fall for 3 years against USD (actually the same as 7 and 10 years ago), pretty stable against EUR, starting to go up against GBP. It's all relative :)
Yes, exactly. Credit is by far the biggest the driver for income in the financial sector, and consequently its biggest source of pain for those swept up in disasters of their own or others making. Anybody thinking of starting something disruptive in the fintech industry needs to have a very clear understanding of the absolutely central role that credit plays in the entire system.
