Avoiding Responsibility

I think I finally figured out the problems with retail banks, and to use management speak they will pretend to understand: they have lost focus on their core interests.

The time-honured basis for banking was this:

1. I have some money. I'm worried that someone will come into my wodden house and steal that money, or that a fire might destroy it.

2. You have a large concrete building designed with security in mind, and a large steel vault. It is the ideal place to store money.

3. How about we come to an arrangement that I will give you my money to store in your vault. That way I know its safe, and because I trust you, I know that you will give me back all of my money when I ask for it.

4. I don't expect you to store my money for free. But rather than me paying you directly, I will authorise you to loan my money to someone else. That person will pay you back my money that you loaned them, plus a premium for the advance.

5. You get to keep most of that premium, part of which will 'pay' for your service to me for keeping my money safe in your vault. But I would hope that you will also pass on a little of the premium to me, because I have helped you generate that premium by giving you my money.

6. When I ask for my money back from you, you will give it all back to me, and thank me for helping you to generate a profit to pay for your family's dinner.

This is how banking occured in the past. It was a good system. Everyone made lots of money, and no-one felt like they were being screwed. The most important point is that everything was correctly viewed as a 'service' - you keeping my money safe for me, me allowing you to loan that money to someone else, that someone else paying you for the advance of the money, you giving me back my money when I asked for it. There was no 'product' here - there was nothing created, nor consumed.

Now banks have changed, and fundamentally changed. Now banks deal in 'products'. What they actually _do_ hasn't changed, but how they view the people they deal with has. Where once we were receiving a service, we are now purchasing a 'product'. The reason - you can sell a lot more products than you can provide services.

Whereas the ability to withdraw you money from the bank was all part and parcel of the service, now you have to purchase the bank tellers' (or more likely ATMs') time to be able to withdraw your money. The bank is longer loaning you money, you are purchasing a mortgage product.

The important point is that neither the person asking them to mind their money, nor the people borrowing that money, have changed their view on the relationship between themselves and the bank. It is only the bank that has decided that they are no longer in the service industry, they are a retailer of banking products. This fundamental change in relationship has yet to be explained to the customers, let alone accepted by them.

The banks argue that it is in the best interests of their customers that this change has happened. Those people who use the banks facilities more frequently, and hence drive up the banks costs, have to pay more because they are consuming more 'products'. This is where it gets insidious. They have turned our minds away from the fact that they derive their profits using _our_ money - in political speak, thats double-dipping. Even the Taxman isn't allowed to do that!

The trouble here though is that the banks have taken the long view - the youth are growing up expecting to pay for everything, including the privilage of using their wallet. Because we no longer have the same attachment to our finances that we once did. When you have $100 in cash in your wallet, you know that you have $100, what it will buy you and how quickly its gone. But we hardly ever see cash anymore - we don't get paid in cash, we don't buy groceries with cash. We don't pay for petrol or anything else with cash. It's all done with a card. And you know what - it costs the banks a bucketload less to do that than to deal with cash, cause they don't need to build a concrete building with a vault anymore. Safer for us. Hardly! But thats for another day.