Where is the Netflix of the Banking Industry?

I opened a German bank account today. My account contract is 59 pages long and only available in German.

I get 0% interest on my current (i.e. checking) account and 1% on my savings account if I have more than €5,000 in it. If I have less than that, I get 0.5%. The inflation rate in Germany is 2.6%

Most banks in Germany charge a monthly fee of up to €12 just to have an account. Mine doesn’t, but only if I deposit €1,200 per month, every month, into it. I’m not allowed to have a credit card until I’ve been in my current job for six months.

It also comes with the following fees:

  • Having a credit card: €30.00 per year
  • Failing to approve my monthly balance statement within 24 hours: €2.50
  • Withdrawing money from a non-German bank account: €6.00
  • Using my credit card outside of Germany: €3.00 or 1% of the purchase, whichever is higher.
  • Transferring money to the US: €30
  • Overdraft: 18% of the amount over

Those are just the ones I remember. The overall fee structure is so complicated that my account manager had a handwritten cheat-sheet for herself so she could tell me what I owed. After I asked questions related to my specific circumstances (I travel, I shop online, etc), she got exasperated: ‘You can’t expect me to know what all the fees are!’ she said.

This bank was recommended to me by my coworkers as offering some of the best conditions in Germany. If this is one of the good ones, I can’t imagine what the others are like.

Whatever country I live in, I’m struck by the sheer magnitude of the ethical problems built into the banking sector. Banks provide an incredibly limited range of services, all through existing infrastructure, with business practices and customer relations straight out of the used-car-salesman playbook.

It’s not like the bank puts a bunch of my bank notes in a big vault somewhere. They invest my money and make interest. The bank-customer relationship is one of mutualism, not parasitism. I give them capital, they give me security. So why am I constantly charged for routine services?

I don’t know much about the particulars of the banking sector in Germany, but I feel like there must be something preventing new entrants into the market. A bank that charged no fees for routine services and gave interest rates comparable to inflation would still make money investing its customers’ deposits. So why aren’t there a bunch of lean, service-oriented banks?

Free-marketeers are always making the argument that without competition, access to goods and services would come to resemble to DMV. It’s worth pointing out that without regulation, the private sector could come to resemble the banks.

3 Comments

Filed under Berlin, Personal

3 responses to “Where is the Netflix of the Banking Industry?

  1. You haven’t lived in Germany for very long, have you? I am told that something like two thirds of all tax and contract law is written in German, and I believe it.

  2. Chris

    What’s needed for real reform of the banking sector by the introduction of a lot more competition, which is by far the best regulator and the best friend of customers – not more rules and inept rulemakers. I’m sure most of those rules and stupid fee’s are a result of short-sighted government regulations.
    Free-marketeers ftw. 🙂

  3. Brandon Mayo

    Despite what the media may otherwise have promulgated during the financial crisis, retail banking is a VERY regulated industry.

    Furthermore, the infrastructure required to enter the industry is equivalent to asking a start-up to recreate the electrical grid from scratch. It’s simply overwhelming and complex. Plus it’s not interesting. New companies would much rather offer other value adding services on top of the infrastructure.

    Nonetheless that hasn’t stop a few (mostly online, direct banking) entrants from knocking the pants off existing players. When ING Direct (from the Netherlands) opened in the US a decade ago, it snatched up hordes of customers (including yours truly) and is doing very well today, probably because they have much of what you have requested above.

    Why did it happen in the US and not in Germany? Because the German market is ridiculous – for both consumers and the banks themselves. SEB (from Sweden) just sold off their retail bank in Germany because they couldn’t make any money on it.

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