Banks: The Disruption Begins?

I wrote a few weeks ago about how banks were setting themselves up to be disrupted by introducing all sorts of extra fees for their customers and basing their business on services people didn’t need.

Now, just a few weeks later, 35,000 people have closed their accounts with major banks and put their money into Credit Unions, as a protest against customer abuse.

That’s certainly one kind of disruption – consumer-driven disruption. And it happened pretty quickly after I blogged that, no?

I told you the time was ripe, but I didn’t realize it was THAT ripe.

But I still think the path is clear for another kind of disruption to happen in banking – a business-driven disruption, where some smart entrepreneur realizes that banks today provide customers with WAY more service (and the fees that go with them) than customers really want or need. And that you could offer a smart alternative that offered a fraction of the services, with a fraction of the fees.

Someone could come along and say, “look, a good bank today really amounts to a couple of things: Cash machines everywhere (so you don’t have to pay fees to get money wherever you go), a good website, and the ability to talk to a human on the phone.” Forget branches, forget tellers, forget savings accounts, forget all of the other services banks offer. Banks, for most of us, are basically just glorified ATMs. A place to put the cash you’re planning on spending before too long, and an easy way to get that cash out. Just offer a checking account, lots of ATMs, and a good website. Plus a human on a phone, if you need one.

And no fees.

And for good measure, you do a deal with the smart phone makers to allow for NFC debit purchases, when that technology finally arrives.

If you do that, you disrupt banking with a new business model. One that focuses on eliminating the “value added” fluff that banks love (because it makes them all of their money) but which still serves 80% of the peoples’ needs (or is it 99%?) without the fees.

I’d use that bank.

Of course, I enjoy customer-driven disruption too, so seeing 35k people switch to credit unions in protest is satisfying for me. But I do expect to see that new bank model come along before too long. There’s just too much discrepancy between what banks are providing, and charging for, and what customers really want.

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