After the recent WashPo article which bashed banks for potentially deriving more value from customers than customers derived from the banks, the Huffington Post must have felt compelled to take back the steering wheel on the bank-bashing bandwagon with a misguided, poorly analyzed article of its own.
In a vituperative article titled Are Banks Innovative?, the author mentions “innovations” like CDOs and swaps that are “thought to have contributed to the failure of the global equity markets in 2008” and goes on to ask:
So are banks innovating in the right areas? Has the innovation in product produced greater customer satisfaction, higher margins and better banking?” Let’s just put it this way, banks are not know for their innovation. But they better start learning, and fast…”
[Note: the above is a straight cut and paste. Yes, it should be “banks are not known”. Poor job of editing/proofreading at HuffPo]
My take: It really is amazing how short-sighted people can be when they want to make some politically-slanted point.
The question regarding the impact of innovation on margins is an impossible to question to ask, because it requires an understanding of what would have happened to margins if none of the “innovations” that have been introduced had not been introduced.
But we can look at whether banks’ innovation have produced greater satisfaction and better banking.
Many of you might be too young remember this, but when I was in college in the late 1970s, ATMs were first coming on the scene. The ability to get cash (which some of you might be too young to remember, as well) at any hour of the day was an advancement in the world of banking that really marks the separation of the dark ages of banking and the modern world. I can’t even begin to tell you (and wouldn’t want my parents or children to know) what the ability to get cash at 10pm on a Friday enabled me to do.
HuffPo also conveniently ignores innovations like:
- Online banking (which I bet even the author of the article does),
- Online bill pay which not only makes bill pay more convenient but saves customers on postage costs,
- Remote deposit capture which lets you take a picture of a check with your iPhone and have it deposited in your account without having to go to a branch or ATM,
- Account aggregation which lets you see all your accounts in one place, or
- Debit cards, which pretty much give you the ability to not have to carry cash in the first place (and which, granted, may be a double-edged sword).
Even before the Internet helped bring on a wave of innovations, there was phone banking which let you get your balance or transfer funds without having to wait in line at the branch during your lunch hour.
The bottom line here is this: To even question whether or not banks have introduced innovations that have improved customer satisfaction and the customer experience is so short-sighted that I shouldn’t have dignified the HuffPo article with even the slightest expenditure on my part.