The original “shot heard round the world” was a volley enraged Massachusetts farmers fired at British troops in Concord, Massachusetts in 1775. Just a minor skirmish, but it kicked off what we on this side of the pond call “the Revolutionary War” (some of my Brit friends rephrase as “getting rid of the pests,” but we won’t go there right now :-). Ironically, the dispute was originally over fees, on tea and other commodities back then, not about independence. But refusal by England to stop exacting offending fees escalated the conflict into a full-scale war that ended the fees, among other things.
That was then. This is now. But is history repeating itself? Recently, rebellious consumers and their advocacy groups have begun saying “enough” to bank and credit card fees. Consumer blowback, the “first shot,” has already forced Chase, Citi and Wells Fargo to and pull back on charges. Not a big deal by itself, and I know I’m overdrawing the parallels. But will this skirmish start something much bigger? Will citizen uproar, reflected by Congress, lead to very stringent consumer protections – emboldening consumers to push back more (and not just at banks)?
I sure don’t have a crystal ball, but I do know that consumer outrage in the US at the financial services sector, justified or not, has finally boiled over. One sure consequnce will be increased pressure on Congress to resist lobbying pressure and vote to invoke what FIs consider very onerous regulation.
What do you think is going to happen? And do you believe that financial institutions can continue operating inside-out, putting profits first, and resist consumer (and government) pressure to start going Outside-In by listening to customers and elevating customer-interests? In almost any other industry I’d jump to answer the second question, “Absolutely not.” But in financial services?
Dick: you’ve identified a reason that free markets don’t work in the best interest of all those in the “value chain”–notably consumers. Banks charge these exorbitant fees because they can. It’s exceedingly difficult for a new entrant to upset the status quo because the companies already playing in the competitive space are making handsome profits. Absent government regulation, banks will continue their exploitation. There’s no reason for them to stop.
Dick, those fees were the equivalent of taxes. Our government started outside-in and turned inside-out. Fix that and everything else will fall into place. After all, we prospered and led the world for so long we’ve become complacent, selfish and forgotten what made our country great. Regulation certainly didn’t get us there.