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The graph in the article suggests the bank's cost for a checking account per year is $250. Wow. That seems like a huge opportunity to provide better banking ser

by gbhn 13y ago

The graph in the article suggests the bank's cost for a checking account per year is $250. Wow. That seems like a huge opportunity to provide better banking service. Driving that cost down to $100 or so would be a very big deal.

shawnee_ 13y ago
According to the CFPB, The banking industry charged a total of $32 billion in overdraft fees to consumers in 2012, an increase of more than 60% from $19.9B in 1990. Part of this increase is that banks have been turning the screws on consumers, increasing the average overdraft fee from $27 in 2007 to $34 today. Those fee increases would be more acceptable if they went to cover the costs associated with those transactions. Unfortunately, this is not the case. Only 14% of the average fee goes toward the cost over covering the overdraft, meaning that 86% of the average overdraft fee is pure profit for the bank. Collusion sucks and keeps the amount that consumers shell out unnaturally high. Anybody that would compete on price gets bought, eventually, by one the big banks (Chase, BoA, Wells Fargo, etc) because they're just buying customers. Your small-town bank that offered cheap checking gets bought by big bad Chase and now you have to pay $35.00 for overdrafts, ad nauseum. Something similar is happening right now with collusion between payments processors (like WePay, Stripe, Balanced) and those same big banks regarding Interchange, "processing fees", etc. The Durbin Amendment, which the author mentioned briefly (but with an outdated reference) was a start in the right direction but there's still a long way to go. More on the Durbin Amendment: http://ink.hackeress.com/2013/08/its-time-for-price-war-in-payments.html http://ink.hackeress.com/2013/08/its-time-for-price-war-in-p...
- tadfisher 13y ago
  On the other hand, the big banks are creating a market opportunity for retail banking services that do not profit from fees. I chose to work at Simple [1] in part because I believe competition in this space will improve the industry as a whole. The best weapon against predatory banking is giving customers the tools to understand their own finances. Because fees comprise an ever-growing portion of profits, it is not in the big banks' interest to provide these tools, thus they will always be a poorer experience than the services that do. [1] https://simple.com https://simple.com
chiph 13y ago
Banks have a lot of overhead. Typically, they do not write their own software - they buy a package (and spend nearly as much time/money writing integration code, but that's a separate topic.) There's also mandatory costs -- SOX says you must have a disaster recovery plan in place, and you must conduct regular tests. You must have access controls in place, which includes things like mandatory vacation time for sysadmins and developers (so they can't write backdoors into the systems). Customers not having access to their funds because of system problems is highly frowned upon by regulators, so high-availability with redundant computers + software is a given. Passing a SAS-70 audit is just the beginning.

by gbhn 13y ago

shawnee_ 13y ago

According to the CFPB, The banking industry charged a total of $32 billion in overdraft fees to consumers in 2012, an increase of more than 60% from $19.9B in 1990. Part of this increase is that banks have been turning the screws on consumers, increasing the average overdraft fee from $27 in 2007 to $34 today. Those fee increases would be more acceptable if they went to cover the costs associated with those transactions. Unfortunately, this is not the case. Only 14% of the average fee goes toward the cost over covering the overdraft, meaning that 86% of the average overdraft fee is pure profit for the bank. Collusion sucks and keeps the amount that consumers shell out unnaturally high. Anybody that would compete on price gets bought, eventually, by one the big banks (Chase, BoA, Wells Fargo, etc) because they're just buying customers. Your small-town bank that offered cheap checking gets bought by big bad Chase and now you have to pay $35.00 for overdrafts, ad nauseum. Something similar is happening right now with collusion between payments processors (like WePay, Stripe, Balanced) and those same big banks regarding Interchange, "processing fees", etc. The Durbin Amendment, which the author mentioned briefly (but with an outdated reference) was a start in the right direction but there's still a long way to go. More on the Durbin Amendment: http://ink.hackeress.com/2013/08/its-time-for-price-war-in-payments.html http://ink.hackeress.com/2013/08/its-time-for-price-war-in-p...

tadfisher 13y ago
On the other hand, the big banks are creating a market opportunity for retail banking services that do not profit from fees. I chose to work at Simple [1] in part because I believe competition in this space will improve the industry as a whole. The best weapon against predatory banking is giving customers the tools to understand their own finances. Because fees comprise an ever-growing portion of profits, it is not in the big banks' interest to provide these tools, thus they will always be a poorer experience than the services that do. [1] https://simple.com https://simple.com

chiph 13y ago

Banks have a lot of overhead. Typically, they do not write their own software - they buy a package (and spend nearly as much time/money writing integration code, but that's a separate topic.) There's also mandatory costs -- SOX says you must have a disaster recovery plan in place, and you must conduct regular tests. You must have access controls in place, which includes things like mandatory vacation time for sysadmins and developers (so they can't write backdoors into the systems). Customers not having access to their funds because of system problems is highly frowned upon by regulators, so high-availability with redundant computers + software is a given. Passing a SAS-70 audit is just the beginning.