Image courtesy of Håkan Dahlström

A simple, free-market solution to the banking problem

Image courtesy of Håkan Dahlström

Banks aren’t popular. In fact, these days, they’re giving estate agents, property developers and other assorted vermin a run for their money. But I’m not talking about the billion pound hedge funds, derivatives traders, and pinstripe-suited chaps who thoroughly enjoy the odd £40,000 bottle of champagne. I figure, if they work hard and generate billions for the economy, they probably deserve to let their hair down. If I’d earned a cool million for someone else today, I reckon I’d be entitled to a whopping bonus.

What I’m talking about is the service you and I get on the high street.

Actually, if my bank is anything to go by, you don’t get any service on the high street at all. The last three times I’ve popped into my local branch, they’ve told me: sorry, we can’t help you. You’ll have to call telephone banking. Telephone banking is, of course, in India. After a half hour wait, I’m greeted with a line that sounds like they’ve trailed a thin copper wire half way across the globe (or maybe just two tin cans and some string) and connected me with a guy who, if he learned English at all, he only learned it yesterday.

They charge you twenty quid for going five pence overdrawn. They charge you 18.9% on your “approved” overdraft. Yet they only give you 0.0000003% interest on any balance you actually have in your account, whether it’s £5 or £5000.

The service is appalling. The charges are outrageous. The banks are a rip off. The smug banker says: “Yeah. But what the fuck are you going to do about it?”

The answer at the minute, of course, is nothing. Sure, you could take your account somewhere else. But they’re all the same. I’ve had the same experience at both Lloyds and HSBC. I transferred from Lloyds hoping for better service. HSBC gave me precisely jack shit. What’s worse is the rigmarole of moving your account. And that’s where my plan comes in.

If you want to change your phone provider, but keep your phone number, your network is obliged to give you a simple string of digits called a PAC number to take to your new network, transferring your old number across in a matter of days. Why can’t we do the same for banks?

Your bank annoys you. You tell them “fix it, or I’m leaving.” In three days, you get your PAC number, you give it to the new bank, and all your details are automatically transferred. Your account keeps working as normal. It takes five minutes to do.

Greater regulation of high street banking isn’t the answer.

Sure, there would be a cost to set up a system like this. But that’s what governments are for: light-touch regulation. Setting up the infrastructure to securely transfer people’s banking business from one bank to the other would be much easier than drawing up and enforcing ever greater regulations to limit the banks’ behaviour, regulations that probably won’t even work anyway.

The trouble with banking isn’t lack of competition. It’s the immovability of capital. The ICB’s report fails to see the forest for the trees. Sure, it’s important that the man on the street is protected from rampant speculation (if only because it’s a much better to ring-fence funds than it is to give every last penny a government guarantee). But what matters to people like you and me is the quality of service we receive. And the reason the quality of service is so poor isn’t because “all the banks are the same” so there’s no point moving your money. It’s because it’s so hard to move your accounts from bank to bank, it’s too much trouble for most people to bother.

In other words, your bank is able to carry on giving you poor service, ripping you off and behaving grotesquely incompetently because 99.9% of people can’t switch. A system whereby people could switch their accounts to another bank inside of a week would generate the much needed incentive for competition.

In other words, rather than forcing the banks to offer a better service with more red tape and regulation, increasing competition between the banks by making it simple to take your business elsewhere would force the banks to offer a better service, in effect, fixing themselves.

Al Allday is a digital copywriter and small business owner based in London.

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