At least, Gordon Gecko, the character played by Michael Douglas in the 1987 movie “Wall Street”, was admitting it openly: “greed is good”.
Many providers of financial services for the underserved and disadvantaged seem to be sharing this motto, but they are very covert about it. Of course, they would like to be seen as acting for the greater good of their non-privileged customers, but the price of their products screams otherwise.
Take those prepaid cards supposed to help new residents or un-banked people achieve the American dream: they are precisely those with the highest purchase prices and with the outrageously named “convenience” fees levied at every transaction.
This is Robin Hood in reverse: wealth is being transferred from the less fortunate to the rich -and sometimes famous-, all under the pretense of doing some good.
…combined with shameless exploitation…
Unscrupulous service providers are taking advantage of the simple fact that under-served people are also often “under-complaining”: there is almost no risk of being sued or publicly lashed by consumers with limited access to the media, who can’t afford lawyers, or are simply afraid or ashamed of being publicly identified as victims.
The result? Fees and charges imposed on those who can least afford them.
OK, so maybe the shameless exploitation of under-served, under-complaining customers doesn’t necessarily have its roots only in hypocrisy and greed. In fact, another big culprit is complacency.
… all fueled by pervasive complacency
As I have argued in an earlier post, banks and financial services providers tend to preserve the status quo of an inefficient industry with too many intermediaries and too many Vice Presidents.
Very few market players have the discipline and willingness to structure themselves leanly and resourcefully. Newer entrants are often – but not always- at an advantage because they don’t have to shed a legacy of prior business and process structures.
So, who’s wearing which hat?
The great thing about financial products like consumer prepaid cards is that fees must be posted visibly on websites; this is mandated by the payment networks and by regulations. So anyone can go and see for themselves how much various products will cost them.
Below is a ranking chart based on published fees as of November 12, 2009. The “tips of the hats” are admittedly un-scientific, but the dollar numbers are.
And here below are the same numbers, as a percentage of the money circulated in the cards, assuming a monthly circulation of $320 on average.