Why do we need private banks at all? | 133 comments (133 topical, editorial, 0 hidden)

Could one of these operations be set up under current legislation?

Could it be something we interest a cell-phone company in?
(There's a lot of reasons for them to get into the wider payment transactions business, this could complement...)

by Metatone (metatone [a|t] gmail (dot) com) on Wed Feb 29th, 2012 at 10:49:24 AM EST
[ Parent ]

Re: Now that's radical (none / 0)

And no, I don't know how to make this happen straight away, but following Sven's theory of consumer power, if someone could set up a "deposits bank" that can advertise that it does no lending, so it's incredibly safe in these troubled times... that might make some waves...

by Metatone (metatone [a|t] gmail (dot) com) on Wed Feb 29th, 2012 at 10:52:46 AM EST
[ Parent ]

Re: Now that's radical (none / 1)

The thing is, deposits are perfectly safe in any country with a depositor guarantee (Iceland was special). So you don't get to make that selling point.

It's also a very low-margin business, which means you need to piggy-back on some other activity to be able to make payroll, nevermind turn a profit. That activity has to (a) cover a wide geographic area, and (b) be accustomed to handling substantial amounts of cash or cash-equivalent.

That means you'll be piggybacking on banks, supermarkets or post offices. And the last one is going away, so banks or supermarkets.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Feb 29th, 2012 at 11:07:20 AM EST
[ Parent ]

Re: Now that's radical (none / 0)

I'm thinking mobile phone operator... because I may be able to seed the idea with one...

But yes, supermarkets are the ones already trying to get into banking.

And at least in the UK, deposits are perfectly safe, but plenty of people don't believe that they are safe...

by Metatone (metatone [a|t] gmail (dot) com) on Wed Feb 29th, 2012 at 11:36:06 AM EST
[ Parent ]

Re: Now that's radical (none / 0)

Well, it's gonna be a loss-leader at least until we get out of the current clusterfuck and central banks start hiking their policy rates back up.

But on the upside, if they can make a safe and convenient "cash app" for phones, they will be able to automate some of the drudgery (and hence cost) associated with handling deposits, because they won't have to shift as much physical cash around.

The latter point might actually be the main business venture for a cell phone operator, at least initially. In Denmark alone (5 million people), it's estimated that firms and banks spend on the order of a billion € a year on handling petty cash. So there should be an R&D grant or two in that project. And a couple of hundred million Euro in licensing revenues if they can get people to switch to it wholesale.

And at least in the UK, deposits are perfectly safe, but plenty of people don't believe that they are safe...

OK, point. But I'd be careful about trying to play on that. Because the BoE and Chancellor might, eh, take exception to people starting bank runs for fun and profit.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Feb 29th, 2012 at 11:49:04 AM EST
[ Parent ]

Re: Now that's radical (none / 1)

We can learn from Africa in this area.

No need for research grants.

Now what ?

by pi (etribu-at-opsec.eu) on Sat Mar 3rd, 2012 at 01:16:33 PM EST
[ Parent ]

Re: Now that's radical (none / 1)

In principle you can do it tomorrow.

'You' being a trustworthy entity with equity on the order of € 10 million.

As askod notes, several supermarket chains already do that (though I believe that this is mostly about funding their inventory at the policy rate rather than the retail rate, and not so much about handling deposits).

I would think that cell phone operators would be both too small and too unstable to be plausible depository institutions. I would go with supermarkets if I were to push something like that.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Feb 29th, 2012 at 10:59:16 AM EST
[ Parent ]

Re: Now that's radical (none / 0)

You are correct on all these dimensions.

The mobile operator is big and red... worth a try I suspect...

by Metatone (metatone [a|t] gmail (dot) com) on Wed Feb 29th, 2012 at 11:37:57 AM EST
[ Parent ]

Re: Now that's radical (4.00 / 2)

What I think the superrmarket is really doing is using deposits as a way to take advantage of the psychology of sunk costs. Since I have already set off a sum on their account as my food budget - payable with their card in their stores - I am more likely to treat shopping at their store as lower cost because it comes out of my already set aside food budget instead out of my general budget. Plus they offer discounts for having the card, for paying with the card, for using the card a lot and so on. And of course they are going to collect data from purchases to tailor offerings and see who pays what with what.

So the point with the deposits is not really to make money of them directly, but to use it as part of building customer loyalty around a payment/discount card.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Wed Feb 29th, 2012 at 02:01:58 PM EST
[ Parent ]

Re: Now that's radical (none / 0)

The two are not mutually exclusive. But just looking at the size of an ordinary supermarket inventory compared to its markups, shaving a percentage point or two off their funding cost by tapping directly into the interbank market would easily exceed any possible revenue increase from the effects you're talking about.

Doesn't mean the supermarket in question won't happily accept the extra customers. But that's not the biggest incentive at work here.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Mar 1st, 2012 at 02:45:01 AM EST
[ Parent ]

Re: Now that's radical (none / 1)

I'm not so sure. Supermarkets typically pay for the goods they sell over 6 months after acquring them. Very, very little of their inventory will need to be funded -on the other hand, they will play with the colossal amount of liquidity they have at hand.

But maybe, getting the option of funding at the target rate, they could tell their supplier that they would be open to paying earlier in return for a nice 10% off the price.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi

by Cyrille (cyrillev domain yahoo.fr) on Sat Mar 3rd, 2012 at 02:20:39 AM EST
[ Parent ]

Why do we need private banks at all? | 133 comments (133 topical, 0 editorial, 0 hidden)

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