from the hip

The US believes itself to be a - or perhaps even the most - technologically advanced country in the world. This is a myth, blatantly false. Internet usage, Internet speed, mobile telephone use, Internet phone speeds, and so on, are all among the many areas where the US is increasingly lagging behind the most advanced countries in the world. So is banking and financial services.

I am astonished by the lack of efficiency and the poor customer service of American banks. Here are some real life stories that really shock me, from banks that are all among the top 5 US banks. Here are the cases:

1. Electronic transfer between two customers in the same bank

A friend transferred 1200 dollar to my account. In Scandinavia, the money would have been on my account instantly, as it is a within-bank transaction. Here the bank took 24 to take the money out of my friends’ account, then printed a check and mailed it to me. So, 3 days instead of instantaneously. And unnecessary paper and mail service and postage, all of which, I am sure, customers pay for.

2. Electronic transfer between banks

I paid for something using Paypal. And there wasn’t enough money in my Paypal account, so Paypal withdrew money from my banking account, as they should. However, it took 4 days for this to be processed by the bank. Again, I guess, a check. In Scandinavia this would have taken 1-4 hours, as it is an interbank transfer.

3. Deposit lost by the bank

A friend of mine deposited 800 dollars in her bank. She got a receipt. After a few days she noticed the money weren’t there. She calls the bank. They could not find the deposit, but would investigate. Six weeks 5 long calls, talking usually to two or more people each time, she finally gets the 800 into her account. Now she finds that in two separate cases the bank had given her overdraft fees of 35 dollars that she would not have gotten had the money been where they should. Again she calls. Two calls later the fees are dropped. During this ordeal, the bank never contacted her - she always had to initiate contact.

Now - how it is possible to lose a deposit? How is it possible to not honor a customer’s receipt immediately? Why didn’t be bank get back to her quickly and fix it all? Who made the mistake here - the bank or the customer? It is simply the worst customer service I have ever heard about!

These tales, and others, are so shocking that I wonder how US banks can get away with it? Are American banking customers totally undemanding? Or are they ignorant - don’t know how things are done outside the US and what they should rightfully demand from a modern bank? Do regulatory agencies and consumer organizations not care? Are American businesses unconcerned with banking efficiency? And especially about the banks - do they not care about efficiency? Do they not care about customer service?

It’s easy to fix! Send some guys on a plane to study how it’s done overseas. Buy the software. Do the changes. Get with it! You are lagging by at least a decade!

Or do you just not give a shit?

Every week I receive several offers for American credit cards. And the offers are basically so wild they are completely silly. Mostly I am pre-approved, whatever that means. Now, I am lucky - since I am not an American I don’t have to use any of them. And I don’t.

All of them, of course, have zero interest on something or other and/or have no annual fee. So far all is well. But then the craziness starts.

Wild terms

Stuff like cash-APR 20.9%-26.9%. What? And 3% of the US dollar amount on transactions that are made abroad. Why? Are they nuts? I buy for 2000, they want 60 bucks for doing exactly what?

And then, of course, a so called “finance charge”, up and above the interest rate charged, of 3-5% - depending on the offer - for cash advances. WHAT? So, I take out 1000 dollars in cash, and the buggers want 50 for doing exactly what? Having a machine count bills? Come on!

What to do?

So, on one level my conclusion is: American credit cards are all scams - don’t use them! On another level - for Christ’s sake don’t use them abroad - use cash or travelers cheques!

Efficiency in the credit industry

But then - and this is far more serious: How can the US and Americans tolerate this? An efficient banking and credit industry reduces transaction costs across the board - improves the efficiency for every sector in the economy!

My thinking is that electronic payments are much more efficient than other types. So America must want 99.99% of payments to be electronic. But how can you persuade people to go electronic when the banks and the credit card industry make a scam out it? Well, I don’t think you can.

But other countries have achieved that. And those countries are competitors of the US in the world market. So as long as the US doesn’t sharpen it’s act and get efficient, the competitors have a competitive edge.

Regulation needed

And as far as making consumers and businesses go electronic is concerned: It’s easy to achieve! Just takes some federal regulation. Since the costs of electronic payments, ATM cash advances, and so on, are very close to 0, all the regulators need to do it to impose some low maximum rates.

Say 1 US $ max for cash advances, 2 max if abroad, max interest rate 10% above the Fed’s rate, no charges for over-limit (they can be almost eliminated with modern online technology), but instead allow credit providers to terminate the contract in cases of over the limit. All transfers to the credit card account to be debited within 12 hours.

Does this sound outlandish? Well, it is. I have terms like this on my cards. I can’t thank my bank for it - it’s not because they have chosen to give me terms like this. I have these terms because they have been forced to. But they have no problem complying to them. And they still make excellent money.

See also: Plastic Card Tricks (NYT)
               The World’s Worst Credit Card (it is American, of course!)
               FTC Crack down

I am frequently surprised by the ability of American media to explain away or minimize the role of domestic factors in the current recession in the US. Washington Post provide the most recent example of this kind of foolishness. Today it featured the following headline:

Exports Not Hurt by Euro’s Strength, Official Says

BRUSSELS, April 15 — Most European exporters are not yet feeling the pain of the strong euro, a European Union official said Tuesday — even as aircraft maker Airbus, which sells its planes in U.S. dollars, called the level “unbearable.”

Now, if the euro was strong, this would be ok. However, if it is the dollar that is weak, then businesses in the EU don’t really have any big problems. Then it is only sales in the US that are affected.

From a business point of view it matters a lot whether it is the dollar that is weak or the euro that is strong - it is only for trade between those two areas that it does not matter which is what. But for all other trade - and an increasing proportion of world trade falls in that category - it matters.

And really, the Euro has strengthened somewhat versus a number of currencies, but the US dollar has weakened by 30-40% against virtually all currencies that count. Therefore it is much more appropriate and correct to speak of a weak dollar than a strong euro!

Competitively speaking, that means raw materials and goods that are imported have become comparatively cheaper for the EU and other countries, while they have become comparatively more expensive for the US.

Thus, the low interest rates in the US and the recession feeds back on the competitive situation of the US in the world economy.

I am shocked by the lack of efficiency and the fees charged by American banks! Having lived mostly in Europe, and now residing in the US, I am completely unable to understand American banks.

Checking is costly

I have stopped using checks years ago. But in the US they are still used! Even though debit and credit cards are accepted everywhere, people still use checks. But checks are much more costly for banks than electronic cards. They also take more time to write and control whenever they are used. So the costs as well as the transaction costs are higher. But still there are tens of millions of checks written every day!

This is wild. But I have started to notice why. The first thing is that banks in the US are extremely bad when it comes to electronic payments and transfers, both in terms of efficiency and in terms of the costs (or the fees they impose on users). So the incentives for discontinuing the use of checks for consumers are small.

This is a sad state of affairs. Both the banks, the customers and the US economy lose out on this. Loss of efficiency in the end translates into higher costs for users and hurts the competiveness of American businesses.

Electronic transfer efficiency

I am used to a transfer from one of my own accounts to another of my accounts taking no time at all. Here in the US it takes a day. Transfer to somebody else’s account with the same bank, I am used to taking 1-2 hours. Here it is one to two days. Transfers to other banks I am used to taking 1-4 hours. Here it is 3-5 business days.

But electronic wiring and computers are just as fast in the US as in Europe. So the explanation for this is not technical. It’s simply the banks keeping the money for a while to profit from the float (the accumulated interest of all funds being in “limbo” on the way from one account to another). But this kind of greediness slows down business and imposes business costs on others! And it makes customers angry all the time.

Fees

The cost for an electronic payment is microscopic. Yet in the US the charges for some transfers are dollars instead of cents! How is it possible? I pay 3 bucks to use an ATM to take out money from an account in Europe. Bank of America, which charges this fee, has a cost on this transaction which is unlikely to be higher than 5 cents. How come they are allowed to charge this outrageous amount?

According to CNN money American consumers actually paid more than $36 billion in various fees in 2006! They write that a

.. government study on bank fees released Monday revealed that consumers are ill-informed about the fees they are paying on their checking and savings accounts.

The report, published by the Government Accountability Office, found that some fees assessed by at banks, thrifts and credit unions have steadily increased in recent years - in some cases by double digits.

Overdraft fees, for example, rose 11% between 2000 and 2007, according to the study. Other charges however, like monthly maintenance fees, have declined in recent years.

Regulation

Philosophically, I am a liberalist. I want the market to take care of things. But when markets fail, they need to be regulated. I will write more about the American banking industry later. But to my mind this is an industry in dire need of regulation. It’s really shocking to see that this is possible in the country that really is in the forefront technologically as far as Internet, computers and software is concerned.

It is truly remarkable, isn’t it, that the country with Microsoft, Intel, Dell, Facebook and Google is at the same time at the level of a third world country when it comes to the quality of its banking system?

I have always admired the fact that Americans devote so much time, energy, effort and money to charities. To me, this is one of many great things about American society.

However, I have often found myself to be pretty naive, too. And I may have been just that in this case as well.

While it is true that Americans do give, and some quite heavily, to charities, American charities may not be any better than charities in other parts of the world. I’ve seen many analyses of charities where 80 per cent, 90 per cent of the money, and in some cases even more, never reach the targeted group or purpose.

Lavish spending, bad subcontracting, high salaries, lawyers fees, and lots of other things have, in the bad cases, explained how the money have simply disappeared.

In a report by four professors who specialize in nonprofit accounting, the amount of loss as a result of fraud in non-profit organizations was estimated to be 40 billion dollars.

the typical theft from a charity was committed by a female employee with no criminal record who earned less than $50,000 a year and had worked for the nonprofit at least three years. The amount she stole was less than $40,000.

The most costly cases, the study found, involved male executives earning $100,000 to $149,000 a year. The thieves in such cases had typically been with the organization the longest.

..

If the $40 billion figure is accurate, then the money lost to fraud equaled the combined giving by corporations and foundations in 2006, said Diana Aviv, president and chief executive of the Independent Sector, which represents nonprofit groups.

But Ms. Aviv expressed skepticism about the report, noting that it relied on the fraud examiners association’s estimate of overall fraud across all sectors, including government and corporate.

“They’re lumping all those sectors together, and it could be that the for-profit sector experiences a higher level of fraud, while the nonprofit sector and government experience lower levels,” Ms. Aviv said.

Nonetheless, she said, “even if the figure is $20 billion, that’s still a huge amount and needs to be addressed.”

Now, 40 billion USD is approximately 13% of the money given to charities in 2006. That means, that on the average, 13 cents of every dollar you give disappears. That’s pretty bad!

So for the future, study your charity closely before you give. You may be paying for somebody’s retirement fund in a Swiss bank!

We all know that Norway is an expensive place to visit. However, it may well be that some of the prices are even higher than you may think. I would even so far as to say pretty wild.

A Norwegian blogger yesterday published the fines local police authorities in Norway issues for minor offenses like urinating in public (or in the snow, as the case may be), drinking in public, or starting a fight.

The fine for peeing in the snow in the small city of Trysil, according to the Norwegian newspaper Dagbladet, cited by the blogger, is NOK 10.000. That’s approximately USD 2.000 or GBP 900!

Here is the headline from Dagbladet:

10 000 i bot for å tisse ute

Politiet i Trysil har egne påskepriser for dobesøk ute i naturen.

It says: “10.000 for peeing outdoors. The police in Trysil have their own prices for using nature as a toilet”.

Here is the list of prices compiled by the blogger:

• Trysil: Peeing in the snow - USD 2.000-3.000
• Trysil: Drinking in a public place - same
• Voss: Public fighting - USD 1.000
• Voss: Peeing - USD 400
• Beitostolen/Kvitfjell: Peeing USD 600-1.000

The official term, of course, is not peeing, but urinating in a public place. I’m just abbreviating a little.

Many people ask themselves, quite understandable, what to do when they are out skiing and need to pee? One commentator on the Norwegian blog suggested breaking into a cabin and peeing there. The fine for breaking and entry when in distress is lower than that for peeing, was his argument.

While imposing fines on foreigners and people from the cities seems to be a favorite activity for the Norwegian police, and no doubt brings money into the coffers of the Government and the police departments, crime is rising rapidly in Norway. Many Norwegians, therefore, feel that the focus of the police may be slightly misdirected.