We’ve heard a lot about greedy bankers of late. I’m sticking to half of that theme, but today I want to talk about lazy bankers. Banks not doing the job required of them. They are not asking themselves, ‘what do people need from financial services products?’
We want young people to save and get on the property ladder, so how about a young person having a 40-year repayment mortgage instead of the industry standard of 20 years? A young person on a low salary could borrow six times that amount and have repayments of only £200 a month. Why do no such products exist?
Why are so many of those who have to cope with fluctuating pay packets or a sudden crisis forced to use pay-day loans or the help of a loan shark? You may have heard me moan before about the inability of many lenders to distinguish between one SME and another – one has a brilliant idea, but no collateral, another a poor plan but they are a homeowner: only the latter gets the loan. And what about the older entrepreneur who, despite buckets of business experience and 30 productive years to give, is discriminated against when applying for finance?
This can only mean one thing: a lack of competition. Yes, there is more than one high street bank, but consumers very rarely change banks or shop around for products.
This is why so much of banks’ marketing budgets are invested in young people and student accounts: once they have you, they have you for life.
We, as consumers, need to be more inclined to take our business, savings and accounts elsewhere and teach our children to be more discerning when looking for financial products.
But I would also argue we need to stimulate more competition: we need to break up the banks. RBS should be split up and the new organisations told very firmly that the taxpayer expects them to be more responsive to what we would like, and if that is a 40-year mortgage, or a care ISA, or a modest free overdraft for three months on low turnover accounts, then so be it.
Retail banking, like investment banking has much to do to restore trust in the communities it serves. By having products and service which deliver what people actually need they would go a long way to doing that.