Some thoughts on banks

This might be a bit of a more weird blog post. I have been thinking about banks recently. I know exiting.

Banks are a bit of a fact of life for everyone. Everyone needs a bank. In fact, most companies here in Switzerland will not be able to pay you if you don’t have a bank account. There are more and more shops here as well that only accept payment by card¹. And finally, everyone does need a place to safeguard their money². But still, that begs the question, what kind of value do banks provide?

My requirements for safekeeping

My money should be kept safe, and for that, I’m willing to pay a small percentage, that stands in relation with the current policy rate of the national bank. The current SNB policy rate is 1.25%, but different banks have rates anywhere from 0% to 1% for saving as well as non-savings accounts³. From this, I would say anywhere between 0.25% and 0.5% from the policy rate is probably acceptable. I generally don’t want to pay any monthly fees, although it might be a more just way than paying a percentage. But after all, having my money and getting a bit of interest on my money is not the only way banks make money.

Switzerland is famous, not to say notorious, for its banks. We are a proud nation of bank users and overall, trust in banks is quite high in Switzerland. And funnily enough, people don’t like to change banks. Even if it means higher costs for them.

For a long time, this was not much of a worry for most people, as the higher cost was not in terms of money that people paid for their bank accounts, but simply lost interest rates. Some banks would have a bit higher interest rates, others would have a bit lower ones.

The problem arose when the policy rate dropped below 0% at some point. Banks would rather not charge negative interests to their customers, as this would have seemed like a very unpopular move. So banks instead started to charge monthly fees and keep the interest rates at 0%. And somehow behind the scenes they made it work. I assume that meant that people with less money were charged over proportionally, just as these things work out most of the time.

But I don’t really need any financial advisor service. I don’t have enough money for this to matter, and I’m quite capable (and sometimes even enjoy it) of figuring out what kind of financial products make sense for me, or which ones don’t⁴. I also don’t certainly have much need for banking places with a storefront. Not only that, but I have very limited use for ATMs as well. I only ever require them if I go abroad or to some other place that has absolutely not cards accepted.

So, for me, it is important the bank’s product work well, that means good e-banking and good mobile banking. I also care about being able to use them easily. The same, of course, goes for all the card products as well as savings accounts. I want to be able to use my credit card in the easiest imaginable way, and this includes usages such as Apple Pay and other convenient payment usages (maybe Garmin pay). I also think that banks generally should have good and sensible security procedures⁵.

So what kind of value do banks provide

So this does pose the question, how can banks provide this value in any sensible manner to me? And to be honest, I came to the conclusion that just about every bank can provide me with this, the different is mostly about their cost structure. And this is where I think most banks have a difficult value proposition, at least in my case. I know enough about how to handle my money, and I have quite a bit of difficulty seeing how banks provide some additional value to me.

As such, I have come to a rather simple conclusion. I will use the most convenient banks, with the best cost structures for me. And I will keep one of the legacy banks⁶, just in case, if the neobanks start to make more trouble than they are worth.