The US stock markets closed just a few hours ago. The Dow, NASDAQ and S&P 500 were all up over 1% each. The NASDAQ alone was up 1.72%…a good day for technology stocks. This is off the back of the minutes from the US Federal Reserve’s last meeting easing concerns of future interest rate hikes.
Bloomberg reported that, ‘Several Fed policy makers said a rise in their median projection for the main interest rate exaggerated the likely speed of tightening, according to minutes of their March 18-19 meeting released today.’
Around the world the Nikkei had a harder time of it, down 2.10%, and markets across Europe were subdued with nothing more than a few minor shifts upward. The FTSE performed the best of Europe with an upward movement of 0.68%
Back home on the ASX the All Ords moved up about a percent yesterday although Financials ex-AREITS lagged the overall market at around 0.7% in the black.
Speaking of financials, I’ve come to the conclusion that banks as we’ve known them over the last few decades have come to rely on an increasing array of obscure and potentially deceptive business practices in order to make ever great profits.
In fact today, I’d like to show you a story that proves just how far banks are willing to go keep generating fees and charges off your accounts, even when you don’t have an account anymore!. And what I’m about to explain to you is evidence that banks as you know it are a dying breed.
If you ask the average man in the street, he’d probably agree with the general sentiment that with all their fees and charges, banks manage to make fat profits from their customers. At the very least, they make life harder and more complicated than it needs to be, and soon enough they’ll strangle themselves to death.
And in the wake of their failures, innovative smart financial technology companies will swoop in to take all their customers and profits. And I’ll even tell you which ones are primed to beat the banks and change the way we manage our money.
Now someone I know recently reduced two accounts with a Victorian-based bank to $0. One of those accounts was a normal everyday, savings and transaction account. The other was a credit card account with the same bank. This account balance was also $0.
Over the next couple of months both accounts had fees and charges debited from the account, subsequently putting them both into debit. The bank demanded payment for these fees, ultimately threatening to call in debt collectors.
Now here’s where it gets interesting. A sternly worded email to the bank went to the complaints department. This led to them wiping the ridiculous fees and closing both accounts. Well that was the idea…
And of course they said they would do it as a ‘gesture of good will’. Please. A gesture of good will would be not squeezing your customers to start with.
Yes one account was shut down, the credit card. However the savings account is still open. Further to this, and this is beyond belief, a brand new account has been opened in the person’s name.
Now let me make one clear point here. At no time whatsoever was authorization or approval given in any form to open this account.
So a new account, without consent or approval. In my book, that’s not right.
So there’s a few issues with all of this that clearly shows how archaic and backwards banks are.
Apparently it’s the responsibility of the customer to realise when the bank is screwing them over.
And it makes me laugh when they claim they will sort it all out ‘as a gesture of goodwill’ and then go and open a new account.
The other part that defies me is the extreme difficulty in just getting two simple accounts closed…sorry, now three accounts.
But let me compare this to a couple of other banking and finance related experiences I had personally in the last few months.
I set up a new PayPal account this week. Now you’d think I already would have a PayPal account? Well I did. I had an Australian PayPal account.
But living in the UK means a different set of rules and regulations. So I had to shut down my Aussie PayPal and set up a new one.
Now if I decided to do that with ‘traditional’ banks, it would be a nightmare. When I first moved to the UK it was weeks of forms, emails, bank visits and headaches to set up a UK account and to transfer funds across.
But it took me all of three minutes to shut down my Aussie PayPal, and exactly three more minutes to set up, and link bank accounts and debit cards to my new UK PayPal account.
Now you might start to see my point when I say there’s a swathe of technology companies ready to steal customers from the likes of Bank of Melbourne.
Setting up a Google Wallet account is just as easy. Now although Google Wallet isn’t available in the UK yet, it’s not far off. But in the US not only can you keep your money in your Google balance you can even have a physical linked debit card to the account.
But why would you when you can simply use your smartphone to make payments?
Regardless, to set up a Google Wallet takes about the same time as a PayPal account.
But that’s not it. I also recently installed a Starbucks app on my smartphone. Now you might be thinking why the hell am I talking about a Starbucks app in a discussion on banking?
Well with my Starbucks app I can load funds onto my virtual Starbucks card. That means I can saunter down to Starbucks, and pay for my coffee through my phone. I don’t even need my wallet.
Now I’m not necessarily going to store thousands of dollars in my Starbucks app, but it’s a sign that there are companies thinking about better ways to manage money.
And it’s only a matter of time until the likes of Google becomes a fully-fledged bank. They’ll do savings, loans, investments and payments.
But it’s not just the big tech giants of Google and PayPal changing the banking landscape. There are a number of smaller start-ups gobbling up customers at great speed.
Here’s how the future of banking and finance is going to look.
I’ll keep my day-to-day transaction savings in my Google Wallet or PayPal account.
I’ll use my smartphone to pay for goods and services down the street. Instead of PayPass cards, it’ll just be a tap and go of my phone. That’s because of NFC technology.
My savings might sit in a bank like Fidor Bank, a 100% online bank. Fidor bank is different because the number of Facebook likes directly translates into the interest rate. It’s a bank for digital natives, why do they need branches? They don’t, and it reflects in the ease and community they’re building.
If I need to get a loan, I’m not going to BoM or CBA. I’m going to Zopa, where the peer-to-peer network will provide me with my lending needs. Or I might even be a lender myself, and collect interest payments from someone I’ve provided funds to.
You see innovative, and forward thinking tech companies cover every aspect of the ‘traditional bank’.
Transactions, savings, loans, currency and investments are all arms of banking that consumers can get a better deal elsewhere.
It might be PayPal or Google Wallet for day-to-day accounts. It might be Zopa or Wonga for loans. It might be CurrencyFair or Transferwise for currency exchange. These are all better, user-friendlier examples of how to manage your finances.
The point to all of this is banking and finance are under a huge pressure to change their business model. And I’ve seen no distinct change from any of the major Australian banks.
Sure they’re investing hugely in their technology, making cool apps, and all that jazz. But they’ve missed the point. They need to change the very fabric of their business model to stay relevant.
That’s why I think CBA, ANZ, Westpac and NAB will be the most boring, underperforming financial stocks over the next ten years as the attitudes and money of retail customers begins to shift away.
The banks, the big four, will do everything they can to make life difficult for you. The harder it is, the more likely you are to give up and stay. And they’ll continue with their fees and charges, continue their underhanded ways of stealing your money from right beneath your nose.
And it’ll be these new, innovative technology companies that’ll lead us to a better way. These ‘banks’ of the future figured out if you give us what we want, make it easy, transparent and fair then you’ll have a customer for life.
Regards,
Sam Volkering+
Editor, Tech Insider
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