The promise of free banking, the rise of confusion marketing and the importance of cross-selling

The promise of free banking, the rise of confusion marketing and the importance of cross-selling
The creation and spread of Free-if-in-Credit (FiiC) personal current accounts (PCAs13) since 1984 is a
distinctive feature of UK retail banking, and one which clearly separates it from Management Fees
and Transaction Fees models employed by other European banks (Ashton 2009: 50). This new kind of
personal account, which provides banking services at no charge to those who have positive balances
on their accounts, allowed its originator Midland Bank to gain almost half a million new customers
within a year; the product was then rapidly adopted by other banks, transforming the industry and
creating a PCA market defined by opacity and cross-subsidy. The notion of a ‘free’ service is
interesting in a business model context because the bank will then generate revenues from other
sources, hence the importance of cross-selling additional products for example, insurance, loans or
credit cards to existing customers. This was explicitly highlighted in the Initial Public Offering
prospectus for the TSB Bank, which cites the importance of PCA holders for cross-selling
opportunities (TSB 2014, p.59). The PCA is thus regarded as a ‘gateway’ (CMA 2014a, p.48)) or ‘key
relationship product’ (defaqto 2012, p.2) that provides access to selling opportunities. Research by
Mintel has found that cross-selling is particularly important for some products including cash savings
and credit cards (CMA 2014a:4