Roll on 2016

12 January 2016

Inside Atom

Mark Mullen
Mark Mullen

Roll on 2016

The high-street banks are bloated and inefficient and customers are paying for it

Just last week the Bank of England announced that average savings rates fell to a record low in December of 2015. This week, in fact this year has started with even worse news. A number of the very biggest UK banks are reducing their rates and increasing their fees.

Apparently the cost of running these bloated and inefficient banks has increased, but instead of going on a long-overdue diet, they are simply passing on the cost to their customers. Sound familiar? The music has changed but the lyrics remain the same.

One or two of the bigger banks are blaming their price increases on corresponding increases in the tax they pay through the Bank Levy and Surcharge or on general increases in their costs of capital, but that hasn’t stopped them paying new customers up to £220 to open loss-leading current accounts at the same time that they stealthily reduce the interest they pay to their ‘loyal’ customers.

The Bank Levy was introduced by the Treasury to discourage banks from relying on risky forms of borrowing, of the sort that was blamed for making the 2008 crisis much more dangerous. You remember the banking crisis? That’s the one you’ve already paid for a few times in the form of reduced public spending, currency devaluation brought about by quantitative easing (printing money) and of course increased personal taxation. Now it appears that some of the banks would quite like it if you simply paid for it again.

And you might be interested to know that the banking levy doesn’t apply to deposits that are protected by the Financial Services Compensation Scheme (FSCS). That’s current accounts and savings accounts with balances up to £75,000. So if your bank tells you that price increases or interest rate reductions on your current account or savings account has anything to do with the Bank Levy, your ‘oik detector’ should be exploding in indignation. By the way, many of the same banks reported a 40% or more increase in their profits last year.

Question; when is this swindle going to stop? Answer; when we get some real competition entering the UK banking market, and not before. And real competition isn’t some bright and shiny Fintech brought to you by a bunch of pimply adolescents. Real competition is more efficient banks, more transparent banks, more innovative banks and to put it directly, better value banks. Don’t get me wrong. Technology has a critical role to play in bringing this about. As CEO of Atom I would say that, wouldn’t I? Because we’re busy building a digital bank. But make no mistake, better banking goes way beyond technology.

Barely a week goes by without my being invited to attend a Fintech conference somewhere, either to speak or to listen or sometimes both. I scan the list of attendees and I see the names and the faces of the glitterati of the Fintech world ‘evangalising’ their way to better paychecks. It’s a circus that’s doing the rounds with the same acts taking centre stage.

They have their eyes on Open APIs and Open Banking and the forthcoming Payment Services Directive (PSD). They see the efficiencies that initiatives like these might create. They like the idea of making payments more efficient and frictionless. They see the ‘mash-up’ potential of open-source architecture and ‘exposed APIs’. They are attracted by the thought that they can insinuate themselves between you and your bank and provide you with aggregated account views together with clever money-management and diagnosis tools.

And why not? There’s potentially lots of value for customers in that, and there may even be a real challenge to the dominance of the big banks in there too. But oftentimes I feel that the music drowns out the lyrics. I’ve been a player in this circus for a decent amount of time now and I’ve seen the different acts. As with any troupe, some of them are more compelling than others - I’m quite certain that the same criticism applies to myself.

And so it should, but whatever the merits of the various new banking models, none of which – including Atom – have actually launched, one thing is certain – the big banks will find ways to blame everybody but themselves for the crass and shitty things they do to their customers. And the sooner there’s a few real and genuine alternatives prepared to call them out and offer something new and different, the better.

Roll on 2016.