Why are banks so easy to dislike?

I’ve realised over the last few weeks that my FinTech Karaoke is generally having a dig at bad bankers. It’s easy to have a go at bad bankers or, as the 99% call them, banksters. It’s because there’s a lot of bad practices historically in banking from ripping off customers with hidden fees (PPI); signing them up for things they didn’t know they were signed up for (Wells Fargo); charging them premiums even when they’re dead (National Australia Bank); and more, such as calling them muppets (yes, that was Goldman Sachs) …

In general, it appears that banks treat customers dismally. They give you an umbrella when it’s sunny and take it away when it rains.

Umbrella from Chris Skinner

So, the obvious question is: why aren’t they all bankrupt, if they’re that bad?

Hmmm. I guess first off is that having a go at bankers being bad is a bit like having a go at accountants for being boring. It may have some truth and it makes good comedy, but it is not the reality. For example, most bankers are not that bad, even if most accountants are boring.

Then there is the fact that banks are the centrifugal force around money, and money is power. Money controls our lives, the world, the economy, success and failure; and banks control money. There's a psychological thing there.

Interestingly, even with this customer dislike and fear, big banks are not bankrupt. Most big banks have actually got considerably bigger since the 2008 financial crisis, and that is likely to continue for the foreseeable. For all the neobanks and challenger banks, none of them are going to assail those walls. They’re too high.

And this is because of the basic psychology of money: if you have someone you trust and you can use and deal with them confidently with money, why would you change?

That’s why people generally don’t, even if they can. There’s no need.

It’s not that banks are a utility, although there is something in that, it’s more that banks aim to snaffle you early – whether you’re a consumer or business – and keep you for life. It’s endemic that you’re unlikely to change … because of the psychology of money.

And it’s more than this. Even if corporate clients are called muppets they continue to invest, because they know who makes the money for them. The more effective a market maker, broker, bank is at filling orders, getting the best price, processing at the fastest speed, the more work they get. It’s bees attracted to honey around the pot or moths flying around the light, if you prefer.

Big banks get bigger because they make their clients’ money.

But what about banks’ behaviours? Aren’t they wrong? Won’t banks go under because they treat customers badly, unfairly, terribly?

Not at all. After all, they’re regulated and work this way because they all work this way. They’re all the same.

 

No.

That last part is not true.

They’re not all the same.

They may all look the same, but there are nuances. Some are better with corporate customers; some are better with international services; some are more focused on the retail experience; some are keen to innovate; and so on. They’re not all the same. However, the thing they all have in common is that they are heavily regulated and have to deliver shareholder returns.

Banks are not charities, but are geared ot make profit so that they can pay dividends and attract investors. That’s not worked out well lately, but it’s the reason they all talk about Return-on-Equity (RoE), Cost-Income Ratio and so forth. That’s important. They have to make money. They’re not there just to look pretty.

Secondly, they didn’t ask to be heavily regulated. They’re heavily regulated because they’re up to their necks in risk and, fi that risk gets too much, they’ll implode or explode or something. And that’s not good for the politicians, who know that if a bank fails on their watch, they’ll lose votes. Just look at what happened after 2008 to most major governments.

It is for these two reasons – must make money and regulated to the hilt – that the big banks stay big and are getting bigger. These two reasons and the fact that customers cannot be bothered changing once they’ve been with a bank for a while as, after all, they’re all the same, aren’t they?

Terrible.

But "doing digital" book by @Chris_Skinner helps me understand this in detail with not much negative attitude towards banks anymore. https://t.co/ZSeFbUOID2

Banks are not dumb.

— Jana Petkanic (@JeanneDeBit) September 15, 2020

Anyway, because my Karaoke seems to always be attacking banks, it’s purely because that’s easy and so, in the spirit of Monday, I’m blogging and doing FinTech Karaoke.

If you’re not aware of FinTech Karaoke, it’s just something I started doing for a laugh and it became a weekly thing, thanks to the encouragement of my readers.

This week’s song is inspired by Spotify.

During lockdown, Spotify has found that the song Mr Blue Sky by the Electric Light Orchestra (ELO) is the most popular song of the summer. It makes us feel good, even though the song is over forty years old (stop being ageist). It’s all about happiness, blue skies, sunshine and the fun being back in our lives.

Forget that. Turn it around and bring in the FinTech Karaoke version of Mr. Blue Sky …

 

Mr Blue Sky from Chris Skinner

 

Mr Bank Man*

 

Money’s staying in the bank

There is no debt in sight

I’ve stopped loaning and all my money is in play

That is why

It's a beautiful new day, hey hey

 

Running the online exchange

See how fun it is working in the City

In the banks where once was pity

Mr. Bank Man’s working here today, hey hey

 

Mr. Bank Man please tell us why

You kept us in debt for so long (so long)

Where did we go wrong?

 

Mr. Bank Man please tell us why

You kept us in debt for so long (so long)

Where did we go wrong?

 

Hey, you with the load of debt

Maybe you don’t need to fret

We can get over, and wipe out your loan cover

As today is the day we've waited for

 

Oh Mr. Bank Man please tell us why

You kept us in debt for so long (so long)

Where did we go wrong?

 

Hey there Mr. Bank

We're so pleased to borrow from you

Look around see what you do

Everybody frowns at you

 

Hey there Mr. Bank

We're so pleased to borrow from you

Look around see what you do

Everybody frowns at you

 

Mr. Bank, you want to fight?

Well here comes Mr. Right creeping over

Now his hand is on your shoulder

Never mind I'll remember you this

I'll remember you this way

 

Mr. Bank Man please tell us why

You kept us in debt for so long (so long)

Where did we go wrong?

 

Hey there Mr. Bank

We're so pleased to borrow from you

Look around see what you do

Everybody frowns at you

 

* POSTNOTE

Please note that although this Karaoke is titled Mr. Bank Man, it is not meant to offend other genders. It purely because Ms. Bank Woman or Mx. Bank Person did not fit with the tune and, equally, you rarely find a Woman or LBGTQ running a bank (except Citibank, RBS and …).

Meantime, I don't normally explain why I wear what I wear for my Karaoke but, this time, it's an exception as I'm dressed up as Mr. Bank Man. The flowers are to make the customer feel good; the raincoat in sunshine is due to knowing there will never be an umbrella; the glasses are so I can read the fine print, even if the customer cannot; and the hearing aid is there to show that we are the listening bank ... except it's turned off.