Saturday, December 22, 2012

(Business) Bank Accounts: the world without one

For most of us would find it pretty difficult to imagine a world without a bank account. Think about it, no bargains on eBay, every transaction having to done face to face and cash in hand, but this a reality for a diminishing but still surprising number of people in the west and beyond.  

According to Business insider’s Tim Chen, “there are 30 million consumers, representing a quarter of US households, who earn a collective $1.3 trillion a year. But banks don’t want to serve them”[1]. The “unbanked and underbanked” segment of the US population have fallen victim to well-meaning new legislation enacted by congress that was “aimed at protecting them from high bank fees”, instantly making straightforward bank account unprofitable for banks[2].

With this gap in the market left right open, companies who offer cash in hand services have stepped to fill void such as “check cashers, payday lenders and pawnbrokers...”[3].  This new paradigm in banking has made rather unattractive for low income customers as banks have been hostile towards them to say the least as congress legislation has “slashed banks’ profits on debit card transactions

However, not everybody has been kept from having bank accounts because of banks hostility to low income customers. Due to Northern Ireland irrationally strict bankruptcy laws, people who have fell on hard times could end up spending a year without a bank account due to the strange fact that “no-one is legally entitled to a bank account”[4].  The real price however is inconvenience as it does require some legwork to get what should rather simple transactions sorted.

In the UK, the general mood of unhappiness of people and their banks was underlined by a report were members of the British public expressed their discontent in a YouGov and Henley Business Survey that revealed that “65 (percent) of customers that banks were failing to improve their customer service”[5]In sum opening a bank account in the UK or anywhere else is relatively simple but with the changes in the regulation of banks and what they can charge, banks can, and often will, become hostile towards the their least profitable customers, leaving a gap in the market for other less reputable players.   

[1] T. Chen, 2012, 30 million Americans Don’t Have A Bank Account Thanks to the Banks,
[2] Ibid
[3] Ibid
[4] J. McCullough, 2012, Bankrupt man speaks of life without a bank account,
[5] E. Simon, 2012, 14 million would switch to another bank,

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