How many Bank Vice Presidents does it take to…?
How Many Bank VPs?
The financial services industry is not known for its innovative spirit – see previous post on this subject-. I am not failing to notice the amazing intellectual Rubik’s cubes that were invented in the field of speculative trading and led to the financial crash of last year. I am lamenting the lack of new, cheaper and more efficient services for every day’s management of money by average consumers.
Even more regrettable than the lack of better products and services, is an ossified industry structure with numerous “middle-men” and top-heavy hierarchies dominated by highly paid executives.
Admittedly, it must have been reassuring for bank customers in the 18th, 19th and 20th centuries, to see that the President of their bank was well nourished, could afford to smoke huge cigars, and was surrounded by many Vice-Presidents of the same allure.
But today? How many Vice-Presidents does it take to manage your bank account?
Your money at work
You have probably noticed how ingenious bankers seem to be when it comes to preserving established minimum amounts of fees and charges. They defend fiercely a zero-sum game: if regulators force them to reduce certain fees, then they immediately find some other way of charging customers somewhere else to compensate for the lost revenue stream.
See, when a lot of Vice Presidents are expecting to live off of your money, it (meaning your money) had better yield enough, by whichever way possible.
I am actually unfair to banks: the financial services industry as a whole is unwilling to challenge its own lack of efficiency. It just has too many intermediaries with a vested interest to maintain a status quo.
Take payment services. Unless you are a member of that industry, you are probably not aware of the presence of issuers, acquirers, PSPs (payments services providers), gateway access providers, processors, networks, program managers, program sponsors, ISOs (Independent Sales Organizations) super-ISOs, agents, without mentioning a vast array of technology providers.
Chances are that even your simplest payment transactions touch five or six of these organizations. And pretty much all of them have numerous Vice Presidents of their own…
Do-It-Yourself scrutiny
Financial services seem to be impervious to the type of efficiency improvements and elimination of middle-men that most other industries have to implement to survive.
Rescue packages fueled by public money are of course not helping change the mindset.
Nevertheless, here is how consumers can help force the industry to improve its own efficiency: ask the hard questions and shop for lower prices.
Granted, no one at your bank branch or behind the 1-800 customer support number will answer your nosy questions about how many Vice Presidents at which level of salary your money is supporting, and how many suppliers –and suppliers of suppliers- are being used to deliver services to you.
How about starting with some basic Internet searching to find out:
- Where are the financial service company’s headquarters? (About Us section)
- Is it owned by some other group or has it gone through a cascade of acquisitions in its history? (About Us section again, or simply searching for articles with keywords like “acquire”, “merge”, “sold”). Chances are that a convoluted corporate history has stacked up more management layers than really needed.
- How much are executives being paid? (Investors relations – Proxy statements, if the company is public)
- Has it announced partnerships with third parties for this of that service? (News or Press section, or search for keywords like “processing”, “management services”, “back-end services”,“issuance”, etc)
Then jump to the websites of the third parties mentioned in any partnership announcements and repeat the above.
The same applies to scrutinizing prices. Although financial services are notorious for difficult-to-read “terms and conditions” printed is the smallest character size that they can get away with, they have more obligations than most other industries to be transparent about prices and display them on their Internet sites.
Be prepared to navigate through numerous web pages before discovering the prices you are looking for, but you will almost always find what you need to know.
