Thursday, May 27, 2010

Banking on a loser

Do you have a bank account?

I do and I suspect that pretty much every British subject of working age does too.

My dad, on the other hand, went through his entire life without a bank account. He did have a building society savings account - he had to have one to get a mortgage - but only ever had just one account - and this was a man who didn't have a day off work from the day he was demobbed from the army to the day he retired.

My dad was paid weekly in cash. Once a week he would take his place in the queue for the payroll office and wait his turn to be handed a brown envelope stuffed with notes and coins. When he got home he'd hand the paypacket - unopened - to my mum who would check the deductions, hand dad back his weekly "allowance", take the money she needed for housekeeping and the rest would be set aside to pay bills. Whatever remained at the end of the week went into the savings account.

The routine remained the same for as long as I can remember - and probably went on long after I left home until my dad retired. My dad never had a bank account, never had a cheque book or credit card and never had any debt apart from his mortgage. If we needed something new it would wait until enough money was saved to pay for it. If there wasn't anything we needed then dad would use any excess savings he had to pay off part of his mortgage - although he always maintained a healthy "float" in his savings account for emergencies.

My dad was not untypical of people back then. Millions of people didn't have bank accounts - because they didn't need them. I'm not sure when this changed - my first job was paid weekly in cash and, although I had to have a bank account for my second job I later went on to have other jobs that paid weekly in cash - it was probably the mid eighties when paying weekly started to go out of fashion.

And then, later again (mid nineties?), you had to have a bank account to receive benefits. So, whether you are in work or on benefits, these days you need to have a bank account. This has created a couple of problems.

The first is the most obvious one - the credit bubble. The sudden proliferation of bank accounts - these days most people have multiple accounts with different banks - meant that the banks were suddenly awash with money. The more money banks have the more they tend to lend so credit became more readily available and, of course, more people took advantage of it. The result of all that is the economic mess we have today.

The second problem is less obvious, but a problem nonetheless. The problem is that, because we are required to have a bank account banks have a guaranteed pool of customers - plus they have a guaranteed pool of potential new customers coming along each year as children leave school and start work or claim benefits.

Why is this a problem? Because it means that banks do not have to work so hard at winning customers or keeping them. They know that you and I HAVE to have a bank account and so we will use them whether we want to or not. You can't call it a monopoly as such, but it does amount to something of a cartel and while cartels are not necessarily bad, when it comes to banking they aren't particularly good either.

The situation hasn't been helped by the fact that so many building societies converted to banks and were then subsequently gobbled up by bigger corporations. So, not only is there a cartel, but the cartel is dominated by just a few organisations.

None of this is good for competition or customers. Speaking personally, I've been with the same bank for thirty years and the service I receive now is staggeringly bad compared to that which I received when I was 20 years old! My original branch was closed down. The branch they moved my account to was closed down and the branch I am with now is so hard to access that even an hour lunch break isn't enough for a "quick visit".

The personal letters I received from my bank manager - some nice, some not so nice but all of them relevant and personal to me and signed in ink by the manager - have been replaced with computer generated junk mail for services I don't want or have. When I do want to speak to someone I have to go through an impersonal automated call centre system where I end up speaking to someone whose first language isn't English and who usually can not help me first time anyway. And when I call back I get someone totally different and have to explain the whole thing afresh only to get cut off and find I have to repeat the procedure again and again. I'd write a letter, but I have no idea who to write to or where to send it.

Some days I long for the simple life my dad had. Just give me a weekly paypacket full of notes and coins and I'll manage without the bank account from a bank that couldn't give a damn.


staybryte said...


Small point, you still don't technically need a bank account to receive benefits, not JSA anyway.

I was working in a benefits office until recently, and if a claimant states they wish to be paid by giro (to be cashed at a named post office) then the adviser has to read them a spiel about how much better it would be if they opened a bank account. However, if they insist, giro it is. My wife works in a main post office and cashes several every day.

Keep up the good work.

Roue le Jour said...

And of course payroll robberies added to the gaiety of the nation as well.

Stan said...

Staybryte - thanks for putting me straight. Of course, not being a benefits claimant I wouldn't know myself ;)

Roue Le Jour - at least it was clear who were criminals and the police knew who they were dealing with. These days "payroll snatches" are even more common, but as they usually take the form of electronic fraud and ID theft they are far less likely to be detected let alone solved.

Umbongo said...

"Millions of people didn't have bank accounts - because they didn't need them. I'm not sure when this changed - my first job was paid weekly in cash . ."

The Payment of Wages Act 1960 began the slow repeal of the (mostly) 19th century Truck Acts which required weekly wages to be paid in cash (and not, for instance, in tokens redeemable only at company stores). From then on payment by cheque became both legal and more widespread - hence the increase in the need to have a bank account.