This excerpt is taken from the Introduction to BANKRUPT
The world has changed in many ways, but people still need their local bank to be there to help keep their money safe, save for education, build a future for their families, support their communities, and provide services to small businesses. Yet many people believe that banks have lost their way.
Banks have an excess of computers, branches, websites, mobile apps, and ATMs. They offer a dizzying array of services. But in the process they have lost something precious: their compassion and dedication to their customers.
With advertisements that saturate the airwaves, they compete for our business – but when we givethem our business, the relationship suddenly becomes adversarial. As prospects we are wooed; as customers we are suspect. We become enemies who must be charged fees for every imagined transgression.
The bank hides behind pages of fine print. They sell credit cards that charge breathtaking interest rates. They advertise that they are friendly and community-spirited, yet the average person cannot get a mortgage and the small businessperson cannot get a loan.
The nation’s banks are sitting on trillions of dollars in assets and yet they nickel-and-dime the average customer who has a thousand dollars on deposit. It seems that during the recent Great Recession they figured out how to save themselves, and then how to adapt their business model to increase market share with the richest one percent.
Is it our imagination? Are we, the customers, to blame? Are we ungrateful? Are we demanding services without expecting to pay for them? Fifty years ago, there were no ATMs. If you wanted to withdraw some money out of your bank account for a weekend activity, you had to go to the bank before the doors closed at three o’clock on Friday afternoon. If you couldn’t get there in time, you couldn’t get your cash until Monday morning.The only fee you ever paid was a few bucks for a new box of checks. Banking didn’t cost much, but they didn’t offer many special services, either.
Over the past fifty years, banking and the banking industry have changed. Thanks in part to aggressive marketing by big banks, we take for granted many services that did not exist years ago.
This book is not about creating nostalgia for some imagined golden age that is long past. Change is a necessary part of life. But consumers have a right to expect and demand transparency, fairness, and real competition in the banking industry. They have a right to expect that advances in technology that benefit the banks will also benefit the consumer.
This book examines two key areas of concern. The first is the crisis the banks are facing, and how deep the hole is. This includes what makes it so difficult for the banks to evolve in a positive direction as conditions change, and how the business model that worked fifty years ago may have created many of the problems they must tackle to move forward.
The other is about the disruption that is on the horizon. Two forces are converging to change banking forever. First is the customer demand for good service at an affordable price. Second are technological changes that are reshaping our lives and businesses. Banks will either step up to participate in this disruption – or will fade into the background. For banks to participate they will need to change everything; their culture, their products, their business models, and their services will all need to change. This is not about incremental change; it is about disruption.
Bankers need to reconnect with their community. They need to change their focus from expensive business trips, protecting traditional revenue sources, maintaining legacy systems. The new focus must be on the customer.
Starting with the home equity crisis of late 2007, the Great Recession has been a long and painful period of high unemployment, loss of middle class wealth, and surging poverty. It may be a challenging market environment for the banking industry, but it is even harder on the people who most need their services. The big banks have especially lost their commitment to serving everyday people by providing affordable banking services that empower people’s life and work. In the US the number of American who are opting out of traditional banking is on the increase to new heights; 106 million Americans are cash preferred.
The change that must come will not only benefit millions of households in the United States; it will also impact our competitiveness globally. Innovation in banking will help us be more competitive as we operate in a growing global economy.
As a society, we increasingly bank with a handful of large banks that don’t care about our individual needs. They care about their compensation packages, their careers, and themselves, but they don’t care about their customers. It is a crisis.
To the companies, we say change the boards and change the management teams. Bring on bank leadership that cares about regular people and cares enough to require that their organizations figure out how to give the customers more while charging them less. What is needed are organizations that are leveraging new technologies and redefining products to bring more value to their customers.
This is an optimistic book. It sees the crisis we are experiencing as a way to look forward to a very different kind of future for banking. The middle class needs to recapture banking. We are everyday customers. We can empathize with our neighbors who watch their daily expenses while dreaming of a better future for their children. We are the small business owners or new business creators who start with sweat equity and hard work. And some of us are even the employees of banks.
We don’t have to accept the status quo.
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