banking – The Crap That Comes Out Of My Head

I’ll be honest, it’s not just Lloyds TSB that are bad. When I started up, my company was a body for me to freelance through, and I didn’t need much from a bank. No overdraft, no additional facilities. Nearly three years ago, I approached them to ask for a business overdraft, having decided to take the business full time, and they said “No”. Lloyds TSB came to the rescue and provided the vital lifeline that got me on my way.

It didn’t last. I had a bank manager I could call, on his mobile if needed, and ask questions of. All great, until he left and I was sent a letter saying I now didn’t have a bank manager, but a relationship manger who was based 200 miles away in Leeds, and who I couldn’t just meet with and discuss the business as and when needed. That seemed just about OK to me, until just before Christmas last year when it all got a bit too much to deal with.

I’m sure any of you with Lloyds, and some of you with other banks, have seen these Chip and Pin card readers that are being sent out to customers on the premise of increased security. You put your card in and enter your PIN along with various other pieces of information to put in theoretically unique codes, which, depending on the bank, let you perform various tasks – logging in, paying people, and so on. Well I got sent one just before Christmas, and when I did, I dutifully put the details into the online banking platform provided to me by Lloyds TSB. It promptly locked me out. The code which I entered was somehow invalid, despite being the same as what was on my little card reader device. First bad experience. I build web applications. That’s just shoddy.

A short, but what should be unnecessary, call to telephone banking sorted that and I was on my way. Or so I thought. I have staff to pay, and I have freelancers too. So whenever I want to pay one, each and every time, I have to enter my PIN number to sign in, then enter my PIN again, the account number and amount of the payment in order to get a code to enter on the site to make a payment. I’m told this is to enable Faster Payments. I personally bank with First Direct and Faster Payments works just fine without this ridiculous mechanism that just makes my life a chore. It’s security by obscurity, and doesn’t prevent fraud because people can still swipe my card if I’m in an unscrupulous shop or restaurant for instance.

So I tweeted. And to my surprise Lloyds TSB responded! I sent a private message and a few minutes later I was talking to someone on the Lloyds TSB Twitter team over the phone. The only part of the entire business it seems that wants to try and help. I’ve been informed that by applying for Bulk Payments, which requires me to apply for a credit limit, I can avoid all this fuss. Shame I can’t avoid the fuss caused by not being able to get anyone to actually make Bulk Payments available on my account. It is apparently supposed to take a couple of days, and I gave a bit of leeway over Christmas and New Year. 3 weeks in though I’d expect to have either got it on my account, or to have heard something. So I tweeted again saying nothing had been done, and I was duly informed that my relationship manager would contact me asap. Well he’s supposed to have contacted me three times now, and I’ve not heard a word from him. So I now have a bank that doesn’t care about what its users have to say, or even about servicing them in any kind of way.

That’s where we are to date. I’ll keep you posted on anything else that happens, but I think I’m off to HSBC with my business banking. If you have a business, you’ll at some point ask your bank for something or other, however small it may be. I’d strongly urge you to avoid Lloyds TSB like the plague. They just don’t care. About anything or anyone.

Update 19/01/2011: Well I heard from my relationship manager today. Finally. Apparently my application hasn’t even been processed in any way shape or form. I’m now being asked to send previous two years of accounts to them, despite them being MY BANK and having full access to all of my finances for this entire period. By Fax. Which I don’t have. Because I’m not 90 years old.

And apparently, Bulk Payments doesn’t actually alleviate the need for the card reader. It just means you only need to enter it once per set of transactions made through it. And the application is processed like a business loan. And lets me go over my predefined overdraft limit. This feels like more of a problem than it sets out to resolve. So here’s to some more waiting once I’ve sent my details over and here’s to HSBC who are about to become my new business bank.

I’d like to hear about anyone else’s experiences with these kinds of things. I’m sure I can’t be the only one!

Update 01/02/2011: Turns out if you report your card due to fraudulent activity, Lloyds stop you using their online banking service.

A couple of weeks ago I was watching TV. It doesn’t happen all that often…honest. What prevailed was the usual 3 minutes of advertisements, and one of them was a Natwest ad. You know, the one with the little 8 year old girl who says she puts money in her piggy bank, followed by the Natwest representative telling her she should put it in the bank. For some reason, and I have no idea why, it got me thinking about the problems we’ve got ourselves into recently. By recently, I mean in the last 20 years, and by “we’ve got ourselves into”, I mean exactly that.

We’re all far too happy to accuse one person or another for the problems that face us. Is it really someone elses fault, or should we be taking some responsibility for it? I should say so. After all, it’s our money, and our decision as to where to put it. Why is that someone elses fault? Is it someone elses fault that you put all your money into Corporation X at 31p a share, and it’s now gone bankrupt and your shares are worthless? Is it someone elses fault that you backed “Riding Sunshine” in the 3.30 at Sandown at 20:1 and it fell at the last? Something tells me you’d be prepared to put that down to calculated (or not as the case may be) risk, and losing out because it’s a risky business, this gambling lark.

OK, scene set, and I think some of you will know (others will wonder) where I’m going with this. I have a solution to the problem. It’s a long shot, and is predicated on a couple of somewhat idealistic circumstances, neither of which we are currently availed of. First, that we trust the Government and second that we hadn’t already spent £400bn on bailing the banks out. So with those in mind, and thinking of this as an ideal situation, here we go:

Educating the masses

I actually had an interesting discussion with my dad at the same time as I came up with the name for this blog, telling him about this solution. The interesting thing was his disagreement with me about a key point of my argument. Unfortunately for him, he was wrong. And so are a great many other people. There are two camps: those who know what banks are and how they operate (not the deep down detail, but a good enough understanding), and those that think they do.

The banks are private or publicly listed businesses. They are there to make their owners or shareholders money. Those shareholders have invested money into their respective banks. They expect a return, though there is always a risk that they won’t get it, if the bank goes under or loses money because of decisions made by the board of directors for instance. Just as with those shareholders, when we as individuals put money into those banks, we are effectively investing in them. By putting money in to their reserves, which is what happens, they are able to loan more money based on the amount of money they have in their reserves. They then use this money to make more money, or not as the case may be. It’s a risky business. Why then are we up in arms about the fact that some of these banks have gone under? Any sensible investor doesn’t put all his eggs in one basket, but spreads his or her risk. The issue here is that those of us who have come into money rather than made it are not usually savvy investors, but mere mortals with some funds that need to be put away for a rainy day.

There is an education that’s needed. It starts on the first day of school, and continues until everyone in the country understands how the financial system works in a way that is relevant. I’m not talking about teaching a 5 year old the ins and outs of investing in securities. I’m talking about basic knowledge that is needed to make informed decisions about what to do with your money. At 5 years old, this will amount to “Do I buy the sweets or save for the toy I always wanted?”, getting more complex with age. By adulthood, we should be taking an interest in where our money is going – will the bank I put my money in be investing in securities with a high risk factor, or some other form of investment with a low risk factor. I may well then decide to invest some of my money in the more secure option, and some in the more risky option, with the benefit of higher returns. That’s my call, but I can’t complain if it doesn’t work and I lose that investment.

Like no one else can complain when the banks go under because they got greedy. They’re businesses at the end of the day. Some win, some lose. The Government sure as hell wouldn’t be bailing my business out if it was struggling, so why the banks? Because they’re intrinsic to our society. We need them to have a working economic system. That doesn’t mean I agree with them being bailed out. I fervently disagree.

Shoring up the banking system

Like I said earlier, this relies on trusting the Government. We don’t, but do we trust the banks with our money more? First and foremost, remove the Government guarantee for £50,000. Why is the Government getting involved in our investments? The responsibility for that investment lies with you, the reader and the rest of the public. If you lose it, tough. Your bad. My bad if it was my investment.

That’s not to say we don’t need some form of secure and safe banking. And that’s where the Government can provide. It’d cost a lot less than £400bn too. They already provide gilts that are guaranteed as a long term savings option. This is fine, and works well. What I’m proposing is a “current” banking system. Two choices here:

A bank where the money is guaranteed, a Government run co-operative, if you like. Some small level of interest given based on the banks return on investment.
A bank where the money is not only guaranteed, but it is never touched by anyone but the account holder. 0% interest, but incredibly secure.

The latter option is clearly the safest, as it doesn’t allow the Government to spend your money. This banking system would be used for day to day transactional type banking, as we do every day with our current accounts.

By creating this safety net, the Government is effectively guaranteeing only what is put into their specially created bank, rather than the money invested into the public and private banks. Now, given that most people are greedy themselves, it stands to reason that the majority of us will end up using the existing banks because they provide a much higher level of interest. However, armed with an understanding, this alleviates the need for the Government to step in and bail businesses out, and means that the existing banks will be forced to shore up and secure their investments – if they don’t, then people will just put their money in the safe option the Government provides. Force all existing banks and post offices to accept credits and debits from and to the Government bank and the Government doesn’t even need to set up a bank network, just an administrative team.

Of course, in having a secure store for your money, there is a downside. Because there is no interest paid, though your money is guaranteed, there is no protection from inflation. However, this is mitigated by having a banking structure that is far more secure than it has been in the past. The regulations should certainly be put back into place that stop banks being able to sell loans of loans, and that would further shore the banks up.

It’s all a moot point really. The Government has already spent £400bn of our money, and doing any of this now is a bit pointless. But it’s an idea. Maybe the next time it happens we can look back and see a different solution to the problem. Just how do you secure the banking system so that normal people can use it, safe in the knowledge that their money is not going to disappear any time soon. In my eyes, education, and a slight change to the way we bank now. Remember, you’ve invested in the bank the instant you put money in it. You really should know what the bank is investing that money in before you do. If you don’t, and you lose it, don’t come running.