Last year I spent a month on holiday in the UK, which was the first time I’d travelled overseas since 2019.
Although I paid for my airfares and accommodation before I left, I still needed to sort out a convenient and cost effective way of having access to spending money in one of the world’s most expensive cities.
When I visited the bank to discuss my options I was surprised to learn that they no longer offered foreign exchange services, something most banks seem to have stopped offering in the wake of Covid travel restrictions, and I was wary of using my New Zealand debit or credit cards on my travels because of the apparently high fees they would charge.
A colleague suggested I get a Wise card. Plenty has been written about this service but if you haven’t heard about it here’s a link.
I duly signed up for one over the internet, waited for the card to arrive in the mail and transferred a princely sum of pounds sterling on to it.
Happily, it worked like a charm on my travels and at a very modest cost.
I used it just like any other credit or debit card and if I needed to withdraw cash, I just headed to the nearest ATM, which duly dispensed the cash, invariably without charging fees.
One of the things I noticed about ATMs in the UK was how common they were, much more common than they are here, but hardly any of them were operated by banks.
Most were operated by the major grocery chains under their own livery, who installed them in the convenience stores that are nearly as ubiquitous in the UK as local pubs.
On my return to New Zealand I reflected that I had conducted the entire journey without once having to have any direct contact with a bank or a bank issued product, apart from the initial transfer of money from my account to the Wise card.
Then I noticed something else.
Local ATMs in this country that only a short while ago were emblazoned with bank livery, were no longer being operated by the banks, but by a third party.
This struck me as part of a trend where the banks are progressively withdrawing from arrangements that bring them into direct contact with their customers.
Closing branches, ceasing to provide foreign exchange, selling mortgages through brokers and no longer operating ATMs are all examples of this.
So it set me to wondering if we need banks at all.
There is no shortage of non-bank organisations that will provide you with a credit card or a small loan, or maybe even a larger one.
So could we eventually see the day when we, the great unwashed public with our hard-earned pittances and modest credit requirements, don’t have any direct contact with banks at all?
I think we could.
Because the thing that still ties us to banks is the clearance system they operate that allows us to manage our finances through the various accounts the banks provide.
But that’s not how they make their money, not most of it anyway, even though they charge squillions in fees each year.
Banks make their money by selling debt, lots and lots of debt.
It may be packaged up as mortgages or personal loans, or revolving credit accounts or whatever fancy sounding names they can come up with, but it’s all debt.
And they shovel billions and billions of dollars of it out the door then rake back in an appropriate and extremely well-deserved amount of profit in return.
Imagine how annoying it must be for them to then have to spend so much time and money managing that pesky clearance system that keeps track of all our pennies, or to pay for those call centres that suck up vast sums of money just to help Mrs Thingamejig who has lost her credit card, not to mention the zillions they spend on an army of marketers and spin doctors who work so tirelessly to make sure we understand what fine, caring, upstanding and indeed essential, pillars of our society the banks are.
Wouldn’t it be better if all of that could be palmed off on to third parties, to leave the banks doing what they are really good at, which is peddling debt.
After all, banking is just another form of retailing, which is the expensive part of our current banking ecosystem.
I think it would probably suit them better if they flogged off the public-facing part of their business to concentrate on being the wholesale suppliers behind the scenes, delivering truckloads of fresh debt daily to the new retail banks, who would then bear the cost of packaging it up, advertising it and selling it on to us, the public, and dealing with our pesky complaints and inquiries.
Eventually a bank, as we know it, may be little more than a screen in a corner of a supermarket operating under a trusted brand name we all know and love – a Pam’s Bank perhaps.
The banks we currently know would still be there, but behind the scenes, out of sight and mysteriously pulling the financial strings that govern our lives.
Come to think of it, that’s what they do now, so not much would change.
Whether such a situation develops or not will of course depend entirely on whether or not that’s what the banks themselves want to do.
After all, if there’s one thing they’re good it, it’s getting their own way.
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