Cancelling costs them no money — banks these days don't make money on customer accounts.

tadfisher 4 hours ago | parent | next [-]

On the face of it, this is not true; net interest margin is still the main profit driver, followed by fees. But besides that, retail deposit customers are a conversion funnel for more lucrative financial products such as credit cards and personal loans.

And besides that, banks need capital reserves in the form of customer deposits; if too much money flows out then they will have to either acquire customers or pause their real moneymaking activity (loans).

Your account doesn't make them significant money. Retail banking in general makes boatloads of money, and deposits are central to this now that we're out of zero-interest-rate-land.

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nerdsniper 3 hours ago | parent | next [-]

> And besides that, banks need capital reserves in the form of customer deposits

USA's fractional reserve requirement is now 0%. UK has also gotten rid of their reserve requirement as well. In the UK, the limit to what the bank can loan out is more determined by the market cap of the bank (committed shareholder value). Cash is only strictly needed to cover ... customer deposits.

So in the UK, if a bank gets rid of customer deposits entirely, then it kind of doesn't need any cash anymore. It can just lend money out of thin air based on its total net worth (market cap).

	▲	tadfisher an hour ago \| parent \| next [-]
		Thank you. I should probably know this, but I'm on the engineering side of things and not the business/operations/finance/whatever side.
	▲	3 hours ago \| parent \| prev [-]
		[deleted]

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bigbadfeline 3 hours ago | parent | prev | next [-]

> Retail banking in general makes boatloads of money, and deposits are central to this now that we're out of zero-interest-rate-land.

Talking about banking in general is generally a huge mistake. While deposits may be central, retail deposits are irrelevant for the banks that do > 70% of banking.

> now that we're out of zero-interest-rate-land.

Doesn't matter to them.

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loloquwowndueo 3 hours ago | parent [-]

> retail deposits are irrelevant for the banks that do > 70% of banking.

We’re talking about an individual sticking it to the bank he has an account with by cancelling it. Retail sounds entirely relevant here.

	▲	bigbadfeline 2 hours ago \| parent [-]
		The bulk of deposits in those banks don't come from individual retail and thus the individual's got no sticking power. Citibank interest rate on savings accounts is less than 1%, more like 0.1%, and there are account fees too. They're telling you load and clear "We don't want your money" - you can't argue with that empirical evidence, straight from the horse's mouth.

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direwolf20 2 hours ago | parent | prev [-]

Banks get their reserves by borrowing from the Fed or from other banks that may have deposits. The idea that banks get reserves from deposits is severely outdated. Deposits are free reserves to the bank, but the overhead of maintaining customer accounts makes them an unattractive option.

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malfist 3 hours ago | parent | prev | next [-]

If banks didn't make money on customer accounts they wouldn't offer customer accounts.

	▲	direwolf20 an hour ago \| parent [-]
		They're not making a loss, but it's not a lucrative business.

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loloquwowndueo 4 hours ago | parent | prev | next [-]

Maybe. But I still have to find a bank where you say you’re leaving and they say “oh ok, here’s your account balance, there’s the door”.

The main thing is that they do care about retention.

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pfortuny 3 hours ago | parent | prev [-]

As long as they keep other people’s money, they make money on it.

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bayesnet 3 hours ago | parent [-]

This is arguable for HSBC (in the UK at least). Ringfencing laws post 2008 have made customer deposits in the UK very difficult to invest profitably, to the point where (at least last time I cared about this) they were charging commercial customers to have UK domiciled accounts.

	▲	yjftsjthsd-h 3 hours ago \| parent [-]
		> Ringfencing laws post 2008 have made customer deposits in the UK very difficult to invest profitably, to the point where (at least last time I cared about this) they were charging commercial customers to have UK domiciled accounts. I don't follow; why would regulations on consumer accounts change the price of commercial customer accounts?