So, with any luck, we will be left with relatively small banks, bound by rigid rules and legislation, under strict supervision, and run by reliable people who do not have the urge for expansion. So, they are a little bit boring. They may even be partly owned by the government. It is obviously mandatory for the government, the semi-public sector, and other organizations that administer public funds to do business with these banks. Most European countries own, presently, one or more banks, so we can start today.
“Boring” must obviously not lead to a banking bureaucracy: having a grip on procedures with the aim to cover oneself. Opening up a new private checking account – as I have experienced recently, with the state owned ABN bank in The Netherlands – encompasses half a ton of paperwork, and two and a half hours, for three moments of required physical contact. And that’s in 2013!
These boring banks do business internationally with other boring banks, so that we can also do business across borders in a safe and boring manner. It’s a positive development that ING has recently said goodbye to its insurance division (and if it were up to me, they should divest themselves of their real-estate enterprise as well) in order to just focus on banking. The Dutch state-owned SNS deserves a pat on the back, too, for their new reward policy: any bonuses are capped and are spread out over three years, so they are no longer directly linked to the share price. Yes, it is all very boring, and not very modern.
The customer is tired of invisible mortgage or credit constructions. Thanks to the Basel III Accord requirements, more capital buffers need to be sustained, with the result that less credit can be granted. So, obviously, it is time for something new.
If these boring banks want to do something new, I can think up a few things for them.
How about advising, coaching, and mentoring start-ups and knowmads on financial and economic matters? Existing bank clients can share their experiences with new, potential entrepreneurs and business leaders. Banks could administer the new credit unions, where entrepreneurs lend money to other entrepreneurs. Or, banks could assist the creation of new, informal insurance products, such as the Dutch Broodfondsen.
The bank can act as an incubator and as a facilitator of small enterprise. Instead of playing money shop, they should furnish large bank buildings for flexible workspaces, including Wi-Fi and secretarial support. They should organize training sessions and workshops about personal branding, collaboration, and other handy tips and tricks, for example.
There is plenty of square footage available for such knowmad-flex work lounges in the bank buildings. And if a fee has to be paid, let’s say one Euro per hour, then that is a great opportunity to implement an internet-based micropayment system. Maybe the knowmads can make payments through an alternative currency unit. That way, the banks feed innovation, instead of blocking innovative alternate money creation initiatives.
Banks and their monetary affairs may be boring, but they can create a unique customer experience in the facilitation of unexpected meetings between their stakeholders. And just imagine if all banks would organize it together in an open system. Then, they would be on the right track to stimulate the (new) economy. There are so many great things to do at home. Do Dutch, Belgian, Spanish, or French banks really have to be global players? Most European countries are small countries; let us behave as such.
If a business bank is needed for the few multinationals we still have, then they can come from the USA or China. And, on the flipside, multinationals (as well as country governments) should really wonder if it is still socially responsible to work with banks such as JPMorgan Chase (who earned almost $20 billion in 2012 and issued matching bonuses)…
…Or, should we step into the world of micro payments? Paypal and Amazon are already offering e-checkout services, EasyJet is starting up a bank, and a companies such as Google already have Dutch banking licenses! Established banks are being left behind.
The European National Banks will remain supervisors in my view, but let’s bring in other managers and administrators, please. Not men and women who think they are above the law, but people who do their work quickly and properly, while keeping an eye on future developments. Just like the police force, which has to become increasingly proficient at fighting Internet crimes, banking supervisors will have to be at the top of their game because danger threatens.
To give you an example, 40% of stock exchange business no longer takes place at the official exchange. This is interesting in light of supervision.
Also, there is an increase in high volume trading, a phenomenon where computer systems trade stock autonomously, using all kinds of mathematical formulas that have been devised by quants, or those who apply mathematical techniques to financial investments. This computer-controlled trading has an edge of a couple of tenths of seconds(!) over the rest of the market, and that market reacts to it within tenths of seconds. This generates high volumes at an incredibly high pace. All of this means that the next global financial crisis can literally take place, completely “underwater” within an hour.