Friday, June 8, 2012

The evolution of banking

Cash Flows

My financial organization is complicated, funds flowing through a network of banks that takes a day each month to operate.  So I was intrigued by a recent  Economist report on International Banking that focused on retail institutions like mine.   Before you snooze off, consider the ways that you relate to your bank, as a business owner or as an expat.  Think about how your smartphone has changed, multiplied the ways that you manage and invest money.  Do you use alternatives, like Xoom for money transfers or PayPal for bills, instead of banks?  How will all this impact institutions whose business model (buy money cheaply from depositors, lend it at a higher rate to borrowers, pocket the difference) hasn’t changed in centuries?

So, touching on a few of the article’s points that resonated for me:

Branch banking:  I visit my branch bank for four reasons: to access a no-fee ATM, to deposit a check, to get documentation of account status, and to put papers into my safe deposit box. Everything else, payments, money transfers, investments, reconciliation, I do online.  Does a branch still matter, or will it wither away?

Interestingly, streetside branches have increased in number over the past decade, despite the growth in online banking.  So, as biologists say, they must have overall survival value for the organism.  They assure people that the bank is present and that their money is safe inside.  Banks with lots of branches attract more customers, increase revenues faster, are more profitable.  Branches provide opportunities to sell insurance, investments, and wealth management services.

But I struggle with bank branches.  ING no longer accepts deposits.  They don’t have printers or stamps for documents; can’t facilitate loans or international money transfers.  Barclays and ABN are only slightly better, but (and the article backs this up) banks are making a conscious choice to move away from transaction-based storefronts towards becoming advisory cafés.  ‘More coffee and iPads, but a cold shoulder to traditional requests.

Trust:  Queuing up for a flight from Denver, I was asked if I wanted to drop my bag with the curbside skycap.  No way, I replied, remembering apocryphal stories of luggage “accidently” sent to India because the tip was too small.  I just don’t trust curbside. But I have come to trust other changes, like not needing a paper ticket.  I know that the airlines (even RyanAir) have my reservation in their computer, waiting.

Similarly, in banking and investing I’ve grown comfortable with issuing digital instructions and expecting that they will (eventually) execute.  The process is clear and consistent, transparent, predictable.  I trust it like I do booking an airline ticket.

But there are limits.  I avoid Barclay Connect, where mere proximity to a cashier triggers automatic payment, in favor of Chip and Pin.  I only keep 20 euros on my ABN ChipKnip (mostly for paying parking). I pay cash instead of using a phone-based wallet.  I use credit cards in preference to PayPal; I haven’t switched to Xoom for international transfers.

The issue is trust, not technophobia.  Alternative transactions feel uncontrolled: I don’t know who’s behind them, can’t monitor what’s happening, and bear the risks if they go wrong.  Retail banks will still have my business until I feel confident with the alternatives.

Global banking:  One of the biggest surprises when I first became an expat was the territoriality of finance.  I wanted to open an account with US and European branches so that I could deposit and withdraw money from either side.  Not possible: Manual US-UK-EU interbank transfers remain a time consuming, costly necessity.  I wanted to open a brokerage account in Europe to manage excess business funds.  Not possible: a US citizen can only invest in bank and government bonds issued through banks.

Yet I can book flights, pay bills, and buy supplies internationally, paying with any card in any currency.   If there’s a mismatch, the clearing agency (eg: the bank behind my Visa card) charges a small fee. My Cirrus ATM Card similarly delivers local cash anywhere, I haven’t carried a travellers check in decades.

But truly international banking may be arriving.  It’s driven by legislation that prevents banks from becoming “too big to fail” domestically - international expansion is their remedy.  Santander (Spain), Standard Bank (South Africa), DBS (Singapore), HSBC (UK) are all spreading and, finally interconnecting in ways that will facilitate cross-border banking.

The article predicts that this will come at the expense of smaller community banks.  But I envision more of a two-tier system.  For international business services, I want a single, sprawling institution that can slosh money and investments worldwide.  But for personal banking, the cost and friction of dealing with large banks is punishing.  There’s been a run in the US from large national banks to local credit unions to avoid relentless fees and penalties (I do hate Bank of America and Barclays, who both slam $20 fines on 20p “overdrafts” caused by deposit/withdrawal mismatches).

The report is relevant to the everyday experiences of expats and entrepreneurs, and flags up some alternatives and trends that might be worth considering.  Just like the banks themselves, we all need to be on watch for new opportunities to improve how we buy services and what we pay for them.

Wednesday, June 6, 2012

Winding up the Jubilee


The Jubilee entered it’s final day yesterday, a wind-down into royal church services and local buffets.  The rains let up and a sullen sun emerged weakly behind smoky clouds.  The Royal Oak moved its restaurant outside for a bar-b-q that was more in 4th of July style than upper-class British: balloons, hot dogs, picnic tables, pictures with cutouts of the Queen. 

I was pretty philosophical about it all: the pageantry fused with the four-day weekend to create a fairly agreeable break. We don’t have historic/celebrity events like this, nor do we gather ourselves up for patriotic flotillas and bonfires very often (the 1976 celebration of the country’s 200th anniversary is the last I can think of).  The Jubilee was an agreeable set-piece that didn’t take itself too seriously.


But local people had strong feelings both ways: some put out flags, baked cakes and gave good natured toasts, while others grumbled, resisted, and winced throughout.  ‘Not much middle ground.  It seems a shame: Britain remains an enduring and recognizable institution that has given the world a lot in science, industry, law, art.  The Queen has given over her life to be its public face.  It’s not too much to give her a day’s thanks after 60 years.

Although I did appreciate the joke that she also embodies Cameron’s desire to see 80-year-olds back doing a full day’s work.

Tuesday, June 5, 2012

Celebrating the Diamond Jubilee

145674188DM046_DIAMOND_JUBIQueen Elizabeth celebrates her 60th anniversary on the throne this week, her Diamond Jubilee and only the second British monarch to have one (Queen Victoria was the other).  Predictably, it dominated the 4-day weekend, with extensive coverage of the Flotilla, the Concert, and the Thanksgiving Service.  I give her credit at 87: she was on top of it all throughout.

FlotillaI dropped back into Stansted on Sunday and joined a neighbor to watch the boats.  Unfortunately, BBC cut away to interview random bystanders continually, when I wanted to knowChoir more about the history and people on the boats.  The weather  was absolutely awful, January cold and rain: the poor Philharmonic and Choir bringing up the end was thoroughly drenched (click the picture to hear the song).

Villages across the country sponsored local celebrations today. Barrington had a picnic on the green (above); Shepreth and Orwell threw parties in the town halls.  Not a big crowd, but a happy one, bundled up warm against the wind.  There were flags and decorations and a toast to the Queen.  They told me how nice it was to have “a Colonial” attendance (I’d considered being a Naked Savage instead).  We weren’t organized enough to have a cricket match, treasure hunt, or croquet tournament, so everyone drank and ate and caught up on the latest gossip.



Beacons were lit across the country at 10pm: we went to the nearest hill at Orwell to watch the lighting and the fireworks. The quarter-mile hike out of town was a challenge for many by that hour, and there was a lot of singing-without-words and false-spotting-of-nearby-beacons.  The actual ceremony, precisely timed to 10:01 (Orwell managed to get their lighting classified as a Trust Event rather than the less prestigious (and later-lighting) town event).  There was an impressive display of fireworks, the moon rose on cue, and everyone wobbled back down the hill to conclude the evening.


LN May12 WC Lunch1And, in related Dutch news (as covered by the British), Queen Beatrix attended the Sovereign’s Lunch celebrating the Elizabeth’s Jubilee several weeks ago.  Princess Maxima spoke at the International Conference of Insurance, giving a speech about the importance of financial inclusion and education.  And Crown Prince Willem-Alexander apologized for participating in a toilet-throwing contest on Queen’s Day, saying he felt shame at playing while billions still lacked toilets.

Ah, Royalty.

Sunday, June 3, 2012

Expatriate evensong

I’ve commented before that expat gatherings make for lively and insightful conversation.  Everyone has seen a lot and knows the landscape, has a sharp eye and open attitude to cross-cultural differences, and has a wry sense of humor for senseless and petty impediments.

First-world corruption is paying someone to do what they aren’t supposed to do; third-world is paying for what they should do, commented the diplomat as he poured some wine.  A vigorous debate on political morality followed.


The German strasse means any road, whereas straat is only for a road with bordering buildings, otherwise it’s a weg, observed the architect, munching pizza and prompting a lively debate about the differences between avenues, ways, lanes, alleys, and pavements in the US, UK and Netherlands.


Nations with a colonial history produce better diplomats than nations without one, asserted the historian over coffee.  The virtues of Dutch trading posts vs. British colonies was discussed.  I think that Europeans cite history like Americans tell family stories: there is nothing abstract about it.


Barack Obama is a socialist in the European reform Marxism tradition, asserts Forbes, in what passes for informed dinner-table opinion in the US.  ‘Hard to have an intelligent discussion about the election no matter what angle we started.


I took a stroll through the summer evening afterwards, enjoying the soft lighting, the laughter in the café’s, the  music flowing out of the bars.   It’s still delightful, remarkable.


Americans need to be a bit more cosmopolitan, less xenophobic, more good-natured as we debate social, political, and economic issues. We miss out on a lot of interesting ideas and practical wisdom by bashing “Old Europe” without going to look and pausing to listen.