It’s time we bank customers started talking to each other in the queue

13 March 2010

Matthew Parris offers Another Voice

Banking relies on its customers’ failure to trust each other. In essence, the banker says to the saver, ‘don’t depend on other men — depend on me, your bank.’ The banker then makes his own calculations of the dependability of mankind. He prices this into the returns he offers; he spreads the risk; and he takes his cut. But if he demands too big a cut, his customers will begin to prefer the risk of depending on another individual.

I suspect that banks and building societies today are demanding too big a cut, expecting that inertia, caution and convenience will continue to deter customers from considering the alternative and choosing risk. They have succeeded in taking governments for a ride. Whether they can continue to take their high-street customers for a ride, I begin to wonder.

Matthew Parris is a columnist for the Times.

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David Bouvier

March 17th, 2010 12:30pm Report this comment

While I agree with your broad point about the potential for disintermediation you seem to have completely missed the point of insurance

"Insurance relies on its customers’ failure to trust statistical reasoning."

It is true that the insurer needs to ensure that they charge slightly more than the expected payouts, but I as a customer am not indifferent between the chance of my homing burning down (say, 1:1000 chance of loss of £500k and 999:1000 chance of no loss at all) and a certainty of paying £550 for insurance (vs. expected loss of £500).

Most people choose to pay the £50 extra to pass on the risk to the insurer.

I know that statistically, my expected costs are higher, but the upset of losing the house is more than proportional to the pain of paying the insurance bill.

My statistically expected costs are reduced by not insuring, but my statistically expected contentment is higher if I insure.

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