Crunch 'to bring end to free banks'

Professor Merlin Stone, of Bristol Business School, said free banking was likely to be scaled back, with banks instead likely to copy the rest of Europe and start charging for many of the accounts that they currently offer for free.

He said the current High Court test case over unauthorised overdraft charges could also help tip the balance towards fee-based banking, as banks would be looking to recoup the income they could lose if the case goes against them.

Changes to the way controversial payment protection insurance is sold, announced by the Competition Commission last week, is also likely to reduce banks' income.

In a report commissioned by lifestyle management firm WhiteConcierge, Professor Stone said: "The credit crunch is putting more pressure on companies - especially those in the financial services sector - to protect and grow income streams.

"One consequence of this is that they will increasingly look to migrate their customers from products such as current accounts that have no monthly charges for example, to ones that have these.

"This trend could also increase depending on the outcome of the banks' appeal to the High Court ruling over 'unfair' charges. If the banks are unhappy with the outcome, they may look to recoup lost income from any reduction in their penalty charges."

But he said if banks were to charge customers for products they previously received for free, they would need to improve the services they offered, and one way of doing this may be to offer a concierge service.

He added that companies also needed to find better ways of attracting and keeping more profitable customers.

Professor Stone estimates the number of so-called demi-millionaires, people with at least £500,000 of liquid assets, will rise by 60% to 936,200 by 2016, boosting demand for concierge services.