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December 07, 2012

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bankof.me

Chris, Thanks for sharing your thoughts and your many truly fascinating insights on this and other posts. As you point out there are of course many things in your post which are undoubtedly observeable in the behaviour of many individuals.
Human nature to favour convenience or immediate need being one to justify what may seem to be irrational behaviour to others.
I am however curious if the lack of effectiveness of the datum provided by such transparency on fees is the lack of tools to help analyse and present these fees in a digestable format. I wonder if transparency is in fact the beginnings of providing more unbundled services in addition to bundled services which some may want.
Could transparency encourage comparison of constituent components even if bundled and hence competition or bundles that match your usage profile.
Your bank need not need provide these tools if the data was made available to you in an manner to allow further analysis by tools provided by others third parties (ie standards based data extracts).
In summary I wonder if your views on the usefulness of this data is due to the usability of that data and your ability to take actions on it in a meaniful way. If you had both would your views change and is it therefore worth starting the process to more innovative smart services with a bit more transparency.
Kind regards

Pragmatist

Nice try, Chris, but no cigar ;-) This argument is flawed in so many ways, starting with central premise that customers don't care about charges, just instant gratification or convenience. In essence, they lack real choice, but there are a ton of other issues...

@Bankof.me I agree with you. In part, this is a data problem, which the "Midata" initiative aims to help solve: http://sdj-thefineprint.blogspot.no/2012/11/warning-shot-fired-over-midata.html?m=1

Iang (wikipedia on the economics of cartels)

I'm with Pragmatist on this, any argument that assumes irrational customers is suspect from the start ;-)

Where this angst is coming from is the regulator's occasional desire for competition. They see competition as shown by reducing and "fair" prices, whatever that means. This observation is mostly only that - popular observation and a mythical belief that reducing prices proves we have more competition. With this in mind, regulators go into action: "we must force the prices down."

The problem however is not the prices, nor the transparency, but the lack of competition, in and of itself. When all the providers get together in a club, we call that a cartel in economics. The club obviously serves itself.

So the root problem is that the regulators and banks alike have conducted affairs for decades on the basis that having a club is a good idea. If we recall, the payments networks were originally argued into law in many countries on the same rationales -- fair deals for customers came about because all providers had to offer compatible and safe products. Hence a club, as promoted by regulators, and hence we have a "public cartel" to use wikipedia's words.

http://en.wikipedia.org/wiki/Cartel

Once within a club, with internally regulated processes, competition dies. So the regulators might want to go back and look at the basic economics of the situation before latching onto prices and transparency. This of course is unlikely, they are as much part of the problem as the other members of the cartel.

As regulators are part of the problem, we must await change from the outside. E.g., PSD & eMoney directives have moved s.l.o.w.l.y to encourage competition. E.g.2, systemic banking collapse in Europe will probably create a climate encouraging competition, amongst other things.

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