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It feels like there's a growing split between what borrowers and depositors want from banks. Conventional wisdom says small businesses benefit from a personal

It feels like there's a growing split between what borrowers and depositors want from banks. Conventional wisdom says small businesses benefit from a personal relationship with local bankers who know market conditions and can sign off on loans and lines of credit that a national bank might see as too risky or too small to deal with. But as a depositor, I don't want a personal relationship with my bank at all. I want a reliable IT system with low costs and great tech support if something goes wrong, which is something the scale of a national operation can best deliver.

mey 8y ago
Things I value in a bank as a consumer. Loans that are serviced by a single entity for the life of the loan. Not ordering transactions in an attempt to drive the balance below zero in a day. Ease of ATM access. Customer service. I have all of these at the CU I use. I don't keep large liquid in my CU, instead that is in higher yeild accounts, but that was true with Chase or BoA as well. The reliable IT system has to be there, but you might be horrified about the beast of systems (human and computer) that make our banks/ach/transactions/etc function. I don't worry much about loosing money in the bank due to FDIC/ NCUSIF. I can't audit their internal process so I instead depend on insurance. It kinda removes worry about their IT infra from my mind. If you are above FDIC value, you should be banking with multiple banks and putting your money to better uses.
- madeofpalk 8y ago
  > It kinda removes worry about their IT infra from my mind. For me, 'good IT infrastructure' isnt for reliability (though that's important!), but got good digital products. I want an iPhone app for my bank that's made my actual humans that know how to make apps. In my eyes, the most successful banks have realised that there's actually very little differentiation between financial products between banks, and where you can set yourself apart is with your internet banking and mobile apps. I use Monzo in the UK and really enjoy it.
  - lifeisstillgood 8y ago
    There are some issues here. I also use monzo and would recommend them happily. however i used them to put business expenses on a single card, and each month grabbed the data and pushed it to a 3rd party. then they changed their statements (from memory "Amazon" become "amazon mktplace" - not just in future months but in past downloads. hence their past output depended on current config settings. (another issue was they changed how they represented a chargeback) This would never happen with major banks - because they screwed the pooch with that in the 1980s and still have the same COBOL patches running today. What I am trying to say is that the new banks will offer really good new products - but there is a risk premium.
    - MoBattah 8y ago
      "because they screwed the pooch with that in the 1980s and still have the same COBOL patches running today." What?
- fro0116 8y ago
  I've always wondered what rich people do when their savings/investments vastly exceed the FDIC/SIPC maximums of 250k per institution, because past a certain point, splitting among multiple banking institutions becomes logistically infeasible. Do they tend to get some kind of private insurance against institutional failures for their entire balance? Or do they just not worry about it?
  - jefftk 8y ago
    FDIC protects cash at (fractional reserve) banks. SIPC protects securities at (non-fractional reserve) brokerages. A very rich person isn't going to have enormous quantities in cash; most of it will be invested. But the risk of a brokerage losing your stock is way lower than a bank losing your cash deposits, and even that is very low. If they wanted to buy insurance against it that wouldn't be very expensive.
  - mey 8y ago
    Plenty of places to put money outside a bank depending on liquidity/risk needs. Money market at the lower risk high liquidity end to high risk non-liquid of investing in private companies (Hello world). Managing these kinds of portfolios can be and is a full time job.
qaq 8y ago
"which is something the scale of a national operation can best deliver" I bet people from the field can chip in more but from what I know the systems at large banks are in horrendous state and are a crazy patchwork of legacy systems modern components and incompatible system from various merged/acquired entities.
Spooky23 8y ago
Depositor IT isn't too hard at all. There isn't much of a gap between your average credit union and the best online banks. They all use one of a few COTS systems. Usually the only gap is that it is more difficult to setup inter-bank ACH.
crooked-v 8y ago
I don't trust most national operations to actually have great tech support, though. The few that seem to have reasonably good remote customer service for when things inevitable break are the "online only" banks that exist entirely in that space.
gumby 8y ago
As a startup I really like having a relationship with my bankers (pretty much always SVB -- tried a few others, without the love), including just as a depositor. For my personal bank account though I agree -- just do the job at lowest cost. A cash management account works better for me even than a credit union.
jack_pp 8y ago
Can't you get the loan from the local bank and deposit the money at the national so you can benefit from their infrastructure?
- smelendez 8y ago
  Yes, but that's the problem: then how does the local bank get money to lend out?
  - MoBattah 8y ago
    ....from the Federal Reserve...?
roenxi 8y ago
In the context your banking system is in, this attitude makes perfect sense to me. But bigger picture, it is weird. Note that this is an attitude where the banks are essentially assumed not to be at risk of bankruptcy. Maybe this means the depositor views the banks as a utility - access to the system whereby debts are settled and trade occurs. This is completely at odds with what the banks actually do day-to-day, which is make judgments about which businesses and families have a chance to thrive. They execute this through their decisions on who to loan to, and how much. There is an enormous tension here - the capitalist mechanism to encourage good performance of the banks day-to-day duties is losses and hence bankruptcy if they really muck up. A voting consumer who wants 'reliable IT' and 'Tech Support' isn't going to tolerate that in the design of the system. I don't have any money in the American banking system, so I can be harsh. The world is full of threats and risk; if people can ignore what is been done with their money then the financial abstractions and safety nets are too extreme. It isn't reasonable for a depositor to be completely, purposefully ignorant of what is being done with their money. They should acknowledge and carry some (relatively small amount) of the risk, and have an actual relationship with their banker. I miss the old-world personal relation with the banking manager that a reasonably wealthy individual could enjoy. I think it would create stronger local communities. EDIT obviously depositors with account sizes in the <$10,000 sort of range should be able to ignore the whole financial thing, they don't really have enough money to be interesting. But serious amounts of money should feel some of the risk. Someone with, eg, a $50,000 bond should be able to ask probing questions.
- closeparen 8y ago
  An account with a retail bank is nothing more than the plumbing from employer to landlord, credit card issuer, etc. That plumbing may include a small reservoir to smooth short-term differences in flow rate, but most Americans don't even have that. The very best a bank can possibly do for you is to minimize annoyance and abstain from charging fees. When your short-term/emergency needs are fulfilled and you want a relationship, risk exposure, critical thinking about the use your money is put to, etc. you invest with a broker. Some traditional banks have associated brokerages (Chase/JPM, BofA/Merrill) and some brokerages have minor retail banks (Fidelity, Schwab) but the best-in-class services generally come from different institutions. For most practical purposes, banking and investment are completely different things. That may not have been true historically, but these days the concept of interest on a deposit account is a vestigial curiosity. If you want returns, you go to the stock market.

mey 8y ago

Things I value in a bank as a consumer. Loans that are serviced by a single entity for the life of the loan. Not ordering transactions in an attempt to drive the balance below zero in a day. Ease of ATM access. Customer service. I have all of these at the CU I use. I don't keep large liquid in my CU, instead that is in higher yeild accounts, but that was true with Chase or BoA as well. The reliable IT system has to be there, but you might be horrified about the beast of systems (human and computer) that make our banks/ach/transactions/etc function. I don't worry much about loosing money in the bank due to FDIC/ NCUSIF. I can't audit their internal process so I instead depend on insurance. It kinda removes worry about their IT infra from my mind. If you are above FDIC value, you should be banking with multiple banks and putting your money to better uses.

madeofpalk 8y ago
> It kinda removes worry about their IT infra from my mind. For me, 'good IT infrastructure' isnt for reliability (though that's important!), but got good digital products. I want an iPhone app for my bank that's made my actual humans that know how to make apps. In my eyes, the most successful banks have realised that there's actually very little differentiation between financial products between banks, and where you can set yourself apart is with your internet banking and mobile apps. I use Monzo in the UK and really enjoy it.
- lifeisstillgood 8y ago
  There are some issues here. I also use monzo and would recommend them happily. however i used them to put business expenses on a single card, and each month grabbed the data and pushed it to a 3rd party. then they changed their statements (from memory "Amazon" become "amazon mktplace" - not just in future months but in past downloads. hence their past output depended on current config settings. (another issue was they changed how they represented a chargeback) This would never happen with major banks - because they screwed the pooch with that in the 1980s and still have the same COBOL patches running today. What I am trying to say is that the new banks will offer really good new products - but there is a risk premium.
  - MoBattah 8y ago
    "because they screwed the pooch with that in the 1980s and still have the same COBOL patches running today." What?
fro0116 8y ago
I've always wondered what rich people do when their savings/investments vastly exceed the FDIC/SIPC maximums of 250k per institution, because past a certain point, splitting among multiple banking institutions becomes logistically infeasible. Do they tend to get some kind of private insurance against institutional failures for their entire balance? Or do they just not worry about it?
- jefftk 8y ago
  FDIC protects cash at (fractional reserve) banks. SIPC protects securities at (non-fractional reserve) brokerages. A very rich person isn't going to have enormous quantities in cash; most of it will be invested. But the risk of a brokerage losing your stock is way lower than a bank losing your cash deposits, and even that is very low. If they wanted to buy insurance against it that wouldn't be very expensive.
- mey 8y ago
  Plenty of places to put money outside a bank depending on liquidity/risk needs. Money market at the lower risk high liquidity end to high risk non-liquid of investing in private companies (Hello world). Managing these kinds of portfolios can be and is a full time job.

qaq 8y ago

"which is something the scale of a national operation can best deliver" I bet people from the field can chip in more but from what I know the systems at large banks are in horrendous state and are a crazy patchwork of legacy systems modern components and incompatible system from various merged/acquired entities.

Spooky23 8y ago

Depositor IT isn't too hard at all. There isn't much of a gap between your average credit union and the best online banks. They all use one of a few COTS systems. Usually the only gap is that it is more difficult to setup inter-bank ACH.

crooked-v 8y ago

I don't trust most national operations to actually have great tech support, though. The few that seem to have reasonably good remote customer service for when things inevitable break are the "online only" banks that exist entirely in that space.

gumby 8y ago

As a startup I really like having a relationship with my bankers (pretty much always SVB -- tried a few others, without the love), including just as a depositor. For my personal bank account though I agree -- just do the job at lowest cost. A cash management account works better for me even than a credit union.

jack_pp 8y ago

Can't you get the loan from the local bank and deposit the money at the national so you can benefit from their infrastructure?

smelendez 8y ago
Yes, but that's the problem: then how does the local bank get money to lend out?
- MoBattah 8y ago
  ....from the Federal Reserve...?

roenxi 8y ago

In the context your banking system is in, this attitude makes perfect sense to me. But bigger picture, it is weird. Note that this is an attitude where the banks are essentially assumed not to be at risk of bankruptcy. Maybe this means the depositor views the banks as a utility - access to the system whereby debts are settled and trade occurs. This is completely at odds with what the banks actually do day-to-day, which is make judgments about which businesses and families have a chance to thrive. They execute this through their decisions on who to loan to, and how much. There is an enormous tension here - the capitalist mechanism to encourage good performance of the banks day-to-day duties is losses and hence bankruptcy if they really muck up. A voting consumer who wants 'reliable IT' and 'Tech Support' isn't going to tolerate that in the design of the system. I don't have any money in the American banking system, so I can be harsh. The world is full of threats and risk; if people can ignore what is been done with their money then the financial abstractions and safety nets are too extreme. It isn't reasonable for a depositor to be completely, purposefully ignorant of what is being done with their money. They should acknowledge and carry some (relatively small amount) of the risk, and have an actual relationship with their banker. I miss the old-world personal relation with the banking manager that a reasonably wealthy individual could enjoy. I think it would create stronger local communities. EDIT obviously depositors with account sizes in the <$10,000 sort of range should be able to ignore the whole financial thing, they don't really have enough money to be interesting. But serious amounts of money should feel some of the risk. Someone with, eg, a $50,000 bond should be able to ask probing questions.

closeparen 8y ago
An account with a retail bank is nothing more than the plumbing from employer to landlord, credit card issuer, etc. That plumbing may include a small reservoir to smooth short-term differences in flow rate, but most Americans don't even have that. The very best a bank can possibly do for you is to minimize annoyance and abstain from charging fees. When your short-term/emergency needs are fulfilled and you want a relationship, risk exposure, critical thinking about the use your money is put to, etc. you invest with a broker. Some traditional banks have associated brokerages (Chase/JPM, BofA/Merrill) and some brokerages have minor retail banks (Fidelity, Schwab) but the best-in-class services generally come from different institutions. For most practical purposes, banking and investment are completely different things. That may not have been true historically, but these days the concept of interest on a deposit account is a vestigial curiosity. If you want returns, you go to the stock market.