Thursday, April 19, 2012

Man bites dog in banking industry

You don't often see high-ranking business executives suggest that it should be easier for their customers to leave them. But that, in effect, is what Sallie Krawcheck argues.

Krawcheck, the former president of global wealth and investment management at Charlotte-based Bank of America, wrote a surprising opinion piece for Politico. In it, she makes a case that is unsettling to some of her former banking industry colleagues.

Krawcheck argues that the Consumer Financial Protection Bureau should take dramatic steps to make it easier for consumers to switch banks. Many have been tempted to do so in recent years, but didn't because it was too much trouble. Krawcheck envisions a world with short descriptions of all bank products in plain English. More radically, when switching banks, customers could transfer account numbers and their direct-deposit and bill-pay information. And they could do it all without incurring fees.

Banks should support this, Krawcheck says, even though it would cost them money in the short run.

Krawcheck writes:

For banks, these changes would represent a short-term challenge. Not only would this require investment, it would strip banks of the significant earnings they derive from customer inertia — including earnings from deposits on which they pay below-market interest rates. But such transparency and portability could unleash a significant wave of innovation benefiting the customer, as rewards for that innovation notably improve, rather than being stifled by this inertia.

Across the industry, consumer satisfaction rates probably would rise, putting the industry on more stable footing with customers. This greater trust could, in time, generate greater consumer confidence in taking out loans and taking on risks they now understand, feeding through to economic growth.

Such changes would be enacted by CFPB, a new regulator that has not been seen as a friend to banks. But, Krawcheck says, "Banks should support the CFPB’s efforts. Contrary to conventional wisdom, it’s in their interest." That's because over the long-term it would improve customers' relationship with their bank and their perception of the industry.

Krawcheck, once considered a potential CEO of Bank of America, was forced out last year. So maybe banking insiders could dismiss her ideas as sour grapes. But we think they have a lot of merit. The banking industry has not been known for its outstanding customer service in recent years. This kind of approach could be one way to mend its strained relationships with customers over time.

-- Taylor Batten


Europeanexpat said...

One big headache. Telephone numbers for one have set number of digits, bank accounts do not. Should we also force banks to transfer safety deposit boxes?

Garth Vader said...

When the Bank of America was founded back in 1904, no one ever thought that it would one day truly be the Bank of America. As in (partially) government owned. Just like Government Motors, Chrysler, the entire student loan industry and more, the federal government’s insatiable grasping tentacles are woven throughout one of the world’s largest commercial bank and brokerage operations. And as has always been true, if you take the king’s shilling, you’re damned well going to do his bidding. The folks at McMillan found out recently that means some kinds of business are no longer wanted . . .

From McMillan’s Facebook page via reddit:

Today Mr. Ray Fox, Senior Vice President, Marlet Manager, Business Banking, Global Commercial Banking came to my office. He scheduled the meeting as an “account analysis” meeting in order to evaluate the two lines of credit we have with them. He spent 5 minutes talking about how McMillan has changed in the last 5 years and have become more of a firearms manufacturer than a supplier of accessories.

At this point I interrupted him and asked “Can I possibly save you some time so that you don’t waste your breath? What you are going to tell me is that because we are in the firearms manufacturing business you no longer want my business.”

“That is correct” he says.

I replied “That is okay, we will move our accounts as soon as possible. We can find a 2nd Amendment friendly bank that will be glad to have our business. You won’t mind if I tell the NRA, SCI and everyone one I know that BofA is not firearms industry friendly?”

“You have to do what you must” he said.

“So you are telling me this is a politically motivated decision, is that right?”

Mr Fox confirmed that it was. At which point I told him that the meeting was over and there was nothing left for him to say.

I think it is import for all Americans who believe in and support our 2nd amendment right to keep and bare arms should know when a business does not support these rights. What you do with that knowledge is up to you. When I don’t agree with a business’ political position I can not in good conscience support them. We will soon no longer be accepting Bank of America credit cards as payment for our products.

Kelly D. McMillan
Director of Operations
McMillan Group International, LLC
1638 W Knudsen Dr
Phoenix, Arizona 85027
McMillan Integrity-Global Vision