My take on the bank with the lowest fees

March 16, 2012
3 min read

I have a gripe about all the chatter regarding the bank with the lowest fees.

Say, hypothetically, that you’ve been diagnosed with a severe but benign tumour in a part of your body that’s difficult to operate on – let’s say, in your brain. Which surgeon are you going to pick to perform your operation to remove the growth? The cheapest one? Or the best one? Now hold that thought.

Every bank has some system in place to manage their transactional banking. There’s an online component so that customers can interact with it through their phones or computers, and an offline component that deals with liquidity, risk management, settlements and reports. The best systems have the best capabilities (they can offer share transacting as well as prepaid airtime top-up), the best security (nobody likes their account cleaned out by hackers) and the best management tools, so that the staff behind the scenes can offer customers better lending rates, quicker quotes on home loans for which experts use a loan management software and offer products best suited to their customers.

Now, would you like the cheapest system, with the lowest level of functionality and lowest level of security?

Every bank also has staff, scattered across the country in branches and head offices who do what bankers do – deal with clients, decide on credit extensions, and take advantage of free Friday afternoons when they all close at 2pm or something ridiculous. But the best people cost money. The best people will more than likely tend to your query quicker, be better at understanding your personal circumstance, and probably offer better investment advice.

So I ask again.. Would you like a wet-behind the ears newbie and their team of dead wood dealing with your money and life’s savings every day? I didn’t think so.

There is a point of optimal efficiency, where smart people have invested correctly in technology, and the product, quality of service and related fees are at their best possible position. Some banks are doing this better than others, and it will likely ebb and flow as the years go by. But if you’re only worrying about fees – then please be happy for some relative of Og to come and collect your money with his grubby mits. Given the importance of money in your life today, and more importantly, into retirement, it’s advisable to pay for a bit of value.

Do you agree?



Hi Murray

I only disagree with the context that implies one bank is better than another based on the level of their fees.

In your hypothetical surgical example, I would imagine the utility to wanting to live is pretty high at least for the average “normal” individual walking about in their natural frame of existence.

However, the question seems to be what are you willing to pay to live, an arm or a leg?

Jigsaw from the Saw series could really put that question to the test.

My point is: the retail banking fraternity remains a relatively commoditized industry and in such an industry, price is typically the determining decision factor for the consumer.

When it boils down to which bank you’d bank with, it’s a matter of preference based on the premise that whatever colour you choose blue, red, or green or in between will deliver what you the customer wants.

In Economics 101, after our old scruffy bearded professors were done preaching the gospel of Wealth of Nations, their theoretical ramblings of utility theory had obvious practical applications.

However, do we regularly see these concepts in the real world?
An out of the box solution in my book is to turn the banking industry completely upside down, and offer complete customizable packages. Let the customers choose which services they want and if their marginal utility for each service matches or exceeds the marginal cost they are prepared to pay, at the price level you have a satisfied customer.

Add in the premium for the bank’s branding and technology to the basic service of having a transactional bank account, but the bells and whistles should all be extra options.

A customer might want the extra security, and not give an Og about pre-paid top ups or share transacting; but they want to know they’re not subsidizing the fees that are helping someone else and not them.

Some people like to drive the Toyota Prius with the add-on of a heated steering wheel instead of the Mercedes SL. Those same people might prefer to fly first class instead of economy.

We’re living in a world far removed from the days that Adam Smith walked about in his natural frame of existence but even with the importance of money today, value remains relative and the right to choose is still king.

Greg Smith in his op-ed derailment of GS, made an important point no matter how benign the means.

Have we forgotten about the customer, or do we as wizardry intellectuals decide that the “muppets” don’t really know what’s good for them?


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