I’ve talked for some time about component based banking but what about component based pricing?
Bank pricing is the most opaque part of the industry, and the part that irritates customers the most. Customers get charged high fees for unauthorised overdrafts as this funds free bank services for those who don’t go overdrawn. Banks focus upon packaged accounts and cross-sell because the core deposit account is their loss leader. It is this area of banking that should undergo the most fundamental change over the next years and it is already happening.
When I go to an oversaes ATM, I see the fees being charged ofr currency excahgne and ATM usage, and know exactly what percentage the bank is taking for the pleasure of getting money out of their machine.
Similary, in a business account, I get a break down of all charges for processing cheques and electronic transfers.
When I make an international payment, I can see the fees charged for the international transfer, exchange rates and more.
Unforutnalty, I don’t get that break down when I make a payment through PayPal (who in my view sneak a lot of cost itno the process) or in my deposit account.
That will change.
As we move to compnonet based banking, component based procing will become a new battleground.
50 cents per $100 for my depsoti account?
0.5% fee for trasnfers?
Overdrawn? Costs are $1 a day plus $1 for every transfer in and out of the account.
All of this will become obvious and clear.
In fact, as I stumbled across this the other day, it will become like Ryanair or SouthWest Airlines in banking. This is an idea sparked by John Egan’s ebook on the future of banking:
RYANAIR – THE LOW COST BANK
A bank that doesn’t charge for banking.
Core to Ryanair’s business model is their reluctance to charge any sort of signiﬁcant margin on their core function, i.e. flying people places. Instead, Ryanair actually separates their core business from their core revenues. Customers don’t pay for ﬂights, they pay for comfort and customisation.
The Ryanair bank works the same way. You the customer don’t get charged a margin on ﬁnancial products. You get them at cost, ensuring that Ryanair are consistently the lowest cost provider in the market. If you want a loan, a credit card, a savings account or an overdraft, you ﬁll out all the forms yourself online and any mistakes suffer a monetary penalty. You also pay a fee to be provided with an ATM or laser card, another fee for access to ATM’s in different countries than where you opened the account, another fee for transferring money to other accounts etc. There are no branches and if you want to talk to customer support you have to call a premium rate phone line.
The online component of Ryanair’s bank is besieged by advertisements and optional extras. Trying to pay bills online will have you greeted by banners asking if you want to buy insurance? Or a pension? Or investments? Or an umbrella? Of course, being a customer of Ryanair’s low cost bank entitles you to privileged access to ﬂight sales, instant priority boarding, a bottle of water when you take your seat and maybe even discounts on in-ﬂight merchandise.
Ryanair is belligerently honest about what it offers passengers. It does exactly what it says on the tin. Flights may be cheap but Ryanair have the youngest ﬂeet of planes in Europe. It may drop you in a ﬁeld 100 miles from where you want to go, but they told you that before you booked and they got you there safely.
Ryanair’s bank is the same; you will not be treated to a high standard of luxury or customer service. You will not get frequent correspondence in the post, they will not help you in renegotiating payments but if all you want is somewhere to put your money safely, then this is your bank.
Sounds like a bloody nightmare to me, so I would naturally abscond to the private bank.
PRIVATE BANK – THE PERFECT PLACE FOR YOUR PRIVATES
A bank that charges you the earth to give you heaven.
Private Bank is the bank for those who know that wealth is when you don’t have to worry about fees. As you walk into Private Bank, and of course you do visit our branches because it is your Private Club, you find our masseuse and cocktail waiters at hand.
Meeting with your bank manager is more like meeting with your mentor. Your manager is your friend and sage, and you can talk about anything with them from your money to your relationships. Some of our clients use our services as psychotherapy, others as hypnotherapy and others for sexual therapy. We don’t care, as we can service all of your deepest desires and needs.
All of this for a membership fee of $12,000 per year, along with our rack rate of fees for each service:
- $50 for hypnotherapy
- $100 for psychotherapy
- $1,000 for sexual therapy
Some come and join the Private Bank today … the perfect place for your privates.
If you think this is way off the mark, here’s the concept presentation outlines for just such a private bank I encountered a few years ago.
Private Bank branch – external view
Private Bank branch – reception
Private Bank branch – meeting room
Private Bank branch - library
Private Bank branch – bar
Private Bank branch – spa
Private Bank branch – outline demonstration in operation