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?

I have written earlier, in What’s wrong with American banks about the lack of efficiency, the continued use of checks and their outrageous fees. However, it seems I was much too kind. Some American banks seem to do much worse than even that. Now, according to New York Times,

Wachovia has agreed to pay as much as $144 million to end an investigation that accuses the bank of allowing telemarketers to use its accounts to steal millions of dollars.

So instead of trying to build customer confidence, sharpening up the service, improving efficiency, and building business by producing customer satisfaction, a huge American bank gets involved in a rather petty scam against its own customers for a few million dollars in profit! Elderly customers, at that! Wild! What a great way to destroy a brand name! What a great way to destroy customer confidence – just when they need it the most!

The bank’s actions were “part of a pattern of misconduct” that resulted in Wachovia’s collecting millions of dollars in fees, regulators wrote.

Wachovia has agreed to pay a $10 million fine, contribute $8.9 million to consumer education programs and make restitution to victims that could top $125 million. In a statement, the bank said this “situation was unacceptable and we regret it happened.”

How silly is it possible to behave? When is the American banking industry going to stop treating its customers as uneducated, stupid fools, and instead try to focus on building trust, satisfaction and loyalty by means of excellent service? Or building highly efficient transaction systems using the best available technology and software? In a country that, technologically speaking, is ahead of the rest of the world, but that nevertheless, from an implementation point of view – especially as far as the banking sector is concerned – is 10 years behind Scandinavian and German banks in the use of modern technology? They should improve transaction efficiency and lower costs – not run scams!

And if the high paid executives of the huge American bank are unwilling to or unable to improve their banks and customer service, then why hasn’t there been any regulatory action to just force them to increase efficiency and performance? Do American regulators not know how bad American banking is? Do they not go abroad and study how it’s done elsewhere? Do they think America is still in the forefront – and don’t want to be confused with facts?

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?