Can banks get their mojo back?

Banking is a dirty word in some circles. The recent economic challenges have galvanized the public’s negative sentiment toward those greedy “Wall Street bankers”. What you may not know is many banks would agree with you. The cliché, “a few bad apples spoil it for the whole bunch” applies. Most banks are trying hard to meet the needs of the government regulators while supporting client needs at the same time. Unfortunately, the current business model isn’t stretching between the two very well.

Customers are upset about fees. Yet, many of us have actually benefited by having a few pay for the many, as we had free checking accounts funded by NSF fees and free online banking subsidized by other fees. As loan income declined due to fewer loans and defaulting loans, there was ever more pressure on banks to stay profitable by raising fees. Is that ok? Of course, not. But, it is the system we all bought into when it worked for us. Now it doesn’t work for us anymore and it is time to change it.

Am I a banker? No. Do I like the current banking model? No. Do I support banks in a model that works for all? Yes. As banks struggle to meet two divergent set of needs—the government and customers–we will see changes that take us backward before we go forward.

On the positive side, banks will be much more transparent. In general, they will be more conservative as well, making loans a little more difficult to get. As they review fee structure, they will charge the majority of customers for service, instead of the minority—which means fees for checking and online banking will come back as the standard. In other words, you get what you pay for—and you will pay for what you get. I sincerely hope we see new fee-based services that add real value to our financial management capabilities—more mobile apps, more intrabank account communication, enhanced personal information security and more innovative new financial products.

Unfortunately, according to bankers, such as Peter de Silva, President and COO of UMB Bank, these innovations will be slowed by comprehensive federal regulations designed with good intentions but stifling to an industry that needs to be encouraged to be nimble and forward thinking.

How do you think your bank will change in the future? What service are you willing to pay for? Which ones are you not? Would love to hear your thoughts and comments.

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