Friday, March 7, 2014

This Week in Bank Failures

How well are banks doing? The answer to this question very much depends on whether you ask around Wall Street or among the banks’ customers. The contrast could not have been greater in this week’s headlines. From the Wall Street end, Bank of America was floating a plan for “free” “checking” that it thought would be profitable for the bank. The accounts would have a fixed monthly maintenance charge of $5, so they would be “free” only in the sense of being relatively free of transaction charges. At the same time, there is some indication that customers cannot actually write checks on these accounts, apparently the bank’s way of discouraging heavier users from signing up for this new bargain-basement plan. The senior bank managers who came up with this plan can be assumed to be earning salaries of $200,000 and up, so it is perhaps understandable if they think a fee of $5 a month is pretty painless, barely distinguishable from getting banking services for nothing. The bank is patting itself on the back for coming up with a plan to stay relevant and profitable while reaching out to “low-end” customers who make $100,000 a year and under. (Update: The no-check checking account as released is similar to the advance information on it. Those who imagine it sounds like a good deal may want to compare it to several more mature online checking offerings from other banks that don’t have a maintenance fee.)

Meanwhile, if you ask banking customers how the banks are doing, you get a completely different answer. Scratch (at Viacom) released results from a three-year study of “Millennials,” Americans born between 1981 and 2000, at

The stark headline reads, “Banking is at the highest risk of disruption.” The details are more damning, among them (quoting the report):

  • All 4 of the leading Banks are among the ten least loved brands.
  • 70% say that in 5 years, the way we pay for things will be totally different.
  • 33% believe they won’t need a bank at all.
  • 73% would be more excited about a new offering in financial services from Google, Amazon, Apple, PayPal, or Square than from their own nationwide bank.

So while the giant banks say, “Look at how well we’re doing,” a substantial contingent of their customers are basically just waiting for the banks to go away.

A bitcoin bank of sorts, Flexcoin, closed this week after it was robbed of all of its transactional currency. Based in Edmonton, Alberta, the bank kept bitcoin savings accounts safe by keeping them offline, or “cold.” Any transactional deposits in the bank are gone, though, and unlikely ever to be recovered.

Target’s U.S. customer base has declined by one fifth as consumers wait for details of the retailer’s data breach. The retail chain is working on technological fixes for its problems. In the middle of this activity, Target’s chief information officer resigned this week.