When I was in grammar school our teacher gave each student a small envelope, and we were told to save our pennies and put them in the envelope. On the appointed day we were to bring the coin-laden envelope to school so the banker could come get it and take it to the bank. My teacher explained banking to us. Our money, along with the grown ups money, would help the bank make loans to businesses and families. She told us it was a fair deal: the bank kept our pennies safe, and in exchange they used those pennies to help build the community.
I was proud to save my money at the bank and from a very early age trusted that the bank was there to support my life. Fifty years later, the world has changed in many ways, but people still need their local bank to be there to help keep their money safe, save for education, build a future for their families, support their communities, and provide services to small businesses.
Yet many people today aren’t sure the bank will support their lives. Today, the Pew Institute reports that a checking account customer may be charged as many as forty-nine different fees. How can anyone anticipate and understand forty-nine different fees. It is too complex. So even if the fees make sense, it is impossible for the average person to remember all the potential fees.
And the mortgage crisis is adding to our frustration with banks. Realty Trac, a company that tracks foreclosure activity, announced in January 16, 2012 that more than 5 million Americans were now two months or more behind on their mortgage payments, setting the stage for a record high foreclosure rate this year. One million homes were repossessed by mortgage lenders in 2010, and 2011 is projected to be 1.2 million foreclosures.
So although there have never been more banks ATMs, mobile applications, and internet banking sites, people young and old feel disillusioned about their bank. The confidence and support I once felt bringing my envelop full of pennies to class has been replaced by frustration.
The bank hides behind pages of fine print. They sell credit cards that charge breathtaking interest rates. They advertise that they are friendly and community-spirited, yet the average person cannot get a mortgage and the small businessperson cannot get a loan.
So I decided to write a book about all this (BANKRUPT, Why Banking is Broken. How it can be Transformed). It is not about creating nostalgia for some imagined golden age. Change is a necessary part of life. But consumers have a right to expect and demand transparency, fairness, and real competition in the banking industry. They have a right to expect that advances in technology that benefit the banks will also benefit the consumer.
There is a crisis the banks are facing – the business model that worked fifty years ago does not work now. Bankers need to reinvent themselves and their industry. They need leadership like that provided by Steve Jobs who went back to Apple when it was close to bankruptcy and insisted that for Apple to be great again they would have to build great products that customers love.
Part of the motivation for writing BANKRUPT, is seeing first hand the innovation happening globally around mobile banking. In unexpected places we are seeing banking innovation that could be applicable to our problems. But what the casual observer may not understand is that the change in banking is not just the interface being mobile; everything is changing behind the scenes as well. The banking crisis we are experiencing is an opportunity to look forward to a very different kind of future for banking. We should embrace that opportunity and reinvent banking.
Check out the website for my new book