The Real Reason The Poor Go Without Bank Accounts • Hacker News Board

Re: The Real Reason The Poor Go Without Bank Accounts

#31

Post by belorn » Sat, Sep 21, 2013, 3:45 PM UTC

While the alternative financial service providers is taking the road of improved customer service, the banks are going the other way.

In Sweden, most ATMs is set at a maximum withdraw of 100$, while a few is set at $300. The bank itself also adds additional restriction of maximum $2000 per week. If you want to withdraw more of your own money, you have to ask permission and give a reasonable explanation why one is taking out "that much cash". Only if the bank approves of your reasons to withdraw money will you be able to do so.

All withdraws are of course logged, stored, traded and given away for inspection. I can also be held, for any reason the bank can think of or from outside pressure (like the Wikileaks visa scandal).

I fully understand why more and more people chose to avoid banks. Banks are services. If you voluntary give away your money to be owned and controlled by a third-party, they will indeed do so.

corrected: month -> week

Re: The Real Reason The Poor Go Without Bank Accounts

#32

Post by [deleted] » Sat, Sep 21, 2013, 3:46 PM UTC

aperture wrote: post #27

Currently, I'm interning at a well known banking wealth management company, and I find the rich like to have the same environment. Birthday cards, get well soon cards, calling the client and asking how they are, helping them with last minute account stuff (like making their visa have a higher cap so that cruise trip can be insured). I think a lot of banking should be like this. I doubt it ever could be, as most banks…

[deleted]

Re: The Real Reason The Poor Go Without Bank Accounts

#33

Post by Geee » Sat, Sep 21, 2013, 3:50 PM UTC

Why is it exactly that online wire transfers aren't used in the US? As an European, I've not been in a bank since the 1990's, and never written or cashed a check. On the other hand, it's impossible to live without a bank account here. Your bank account is the only place you get paid to, whether it's salary or social security money. Also, you need it to pay your bills or transfer money to your friends.

Re: The Real Reason The Poor Go Without Bank Accounts

#34

Post by rm445 » Sat, Sep 21, 2013, 3:51 PM UTC

This article has a lot of fluff and before getting to the point. It just seems unlikely that the success of these shops that provide expensive financial services to poor people is all down to the human touch. I see friendliness in the report but not much in the way of personalised service (just the lady with the payment plan).

The benefits of paying a percentage to get your money a couple of days earlier are clear enough. But the avoidance of overdraft fees may be the key. When paper cheques have had their day and every non-cash transaction is software talking to a bank server, there will be no need for unarranged overdrafts to exist for every bank account. Accounts that carry no risk of unplanned fees would be a disruptive innovation, given that retail banks seem very addicted to the profits from overdraft fees.

Re: The Real Reason The Poor Go Without Bank Accounts

#35

Post by wavesounds » Sat, Sep 21, 2013, 3:52 PM UTC

TLDR: Check cashiers have better customer service and (anecdotally) less stupid fees.

Re: The Real Reason The Poor Go Without Bank Accounts

#36

Post by [deleted] » Sat, Sep 21, 2013, 3:53 PM UTC

waterlesscloud wrote: post #21

rdtsc wrote: post #11

I can understand this. My mother in law was sick for a while and in a hospital for a few months. During that time she was late on one of her mortgage payments, which she as been faithfully paying for 2 decades. She also took an equity loan to remodel her house. Because of the missed payment they cancelled her equity loan. She went to the bank to talk to them hoping they would understand, but all he heard was how his…

Stop banking with big banks. Go local. When my brother started his business, he moved all his banking to a local bank, one that had only one branch, which was downtown in his town. He's built a personal relationship with them, and the flexibility it's given him has paid off in spades over the year. There's no reason to pay some megacorporation to treat you impersonally.

[deleted]

Re: The Real Reason The Poor Go Without Bank Accounts

#37

Post by bobf » Sat, Sep 21, 2013, 3:56 PM UTC

Geee wrote: post #33

Why is it exactly that online wire transfers aren't used in the US? As an European, I've not been in a bank since the 1990's, and never written or cashed a check. On the other hand, it's impossible to live without a bank account here. Your bank account is the only place you get paid to, whether it's salary or social security money. Also, you need it to pay your bills or transfer money to your friends.

Electronic ACH is often used in the US, which is basically the equivalent to an electronic check. Actual wire transfers usually have fees associated with them both to send and receive (~$25), and are thus more rare.

Re: The Real Reason The Poor Go Without Bank Accounts

#38

Post by maxerickson » Sat, Sep 21, 2013, 3:57 PM UTC

Geee wrote: post #33

Why is it exactly that online wire transfers aren't used in the US? As an European, I've not been in a bank since the 1990's, and never written or cashed a check. On the other hand, it's impossible to live without a bank account here. Your bank account is the only place you get paid to, whether it's salary or social security money. Also, you need it to pay your bills or transfer money to your friends.

Because inertia. I expect the greater success overcoming it in Europe is somewhat due to the smaller regulatory units (that is, countries) being serviced by a smaller number of institutions. In a lot of countries, if a handful of large banks say something is so, then it is. That pretty much won't work in the U.S.

Re: The Real Reason The Poor Go Without Bank Accounts

#39

Post by RougeFemme » Sat, Sep 21, 2013, 4:01 PM UTC

belorn wrote: post #31

While the alternative financial service providers is taking the road of improved customer service, the banks are going the other way. In Sweden, most ATMs is set at a maximum withdraw of 100$, while a few is set at $300. The bank itself also adds additional restriction of maximum $2000 per week. If you want to withdraw more of your own money, you have to ask permission and give a reasonable explanation why one is tak…

In the U.S. you don't have to give a reason for taking out your cash (though withdrawals over a certain amount are reported to the Feds). But there are ATM limits. I always assumed - perhaps naively - that the reason was to keep the ATM from running out of cash too quickly, thus minimizing the cost of replenishing them. And occasionally, on 3-day weekends, I have seen more out-of-order ATMS than usual. . .presumably because they had run out of money.

Re: The Real Reason The Poor Go Without Bank Accounts

#40

Post by patio11 » Sat, Sep 21, 2013, 4:01 PM UTC

Some reasons which are cited in the literature, of which there exists lots (http://www.kansascityfed.org/publicat/research/community/Unb... is a good entry point):

1) Many poor people mistrust banks, for reasons ranging from cultural ("Where I come from, they're far more likely to vanish with your cash than the mattress") to personal experience ("I was just going about my business one day but then I ran the account a little low, $300 vanished in fees, my rent check bounced and I got arrested for 'uttering.'").

2) Banks have some assumptions made about their customers which are institutionalized by practice and sometimes regulation or policy. These assumptions map fairly well to the middle class but sometimes don't travel well. Here's four things I could tell you about an adult member of the middle class: they're literate, have a primary address which changes relatively infrequently, carry identification with them, and do not fear speaking to Authority because they're not cognizant of a reason why that should result in their immediate arrest.

3) "Free checking" was a multi-billion dollar ongoing wealth transfer from poor bank customers to banks and relatively wealthier bank customers. ("Free checking" was a marketing tactic very popular in the 90s and early 2000s where banks eliminated monthly fees for checking accounts while slashing minimum balances to open them. The flipside is that they then started cranking up fees generated by e.g. overdrafts. This combination generally tends to not be to the benefit of (many) poor people.)

4) The alternative financial sector has a product mix which more closely matches poor people's needs than traditional banks. For example, short-term loans for small amounts of money available with minimal documentation required are a) astoundingly high risk, b) relatively expensive to process, c) have fairly low margins, and d) carry explosive reputational risk. These counsel against the typical retail bank even trying to offer them. Much better to loan a middle class American $8k out of a credit card limit of $20k at 12% with a 3% loss rate then to loan a poor person $100 with $110 due a week later. (If you APR-ize that it becomes "A number which one never, ever wants to get asked about when you're called to testify before Congress about how you're causing poverty in the community you serve.") Business thus flows to the alternative financial sector.

5) (The literature is a bit circumspect about this one, but it's there.) Sometimes poor people make decisions which, if you appreciated their limited options, individualized viewpoints of the world, and the sociocultural context and structural issues at play... are still very effing bad decisions.