Banks To Raise Prices By 33%?

JP Morgan concludes that banks must raise the prices of all their retail, commercial and investment services by 33% to cover the cost of regulation, if they are to meet current profit forecasts.

The readiness to advance this conclusion highlights the critical lack of competition across the banking sector. Ironically this is a product of the current regulatory framework. Currently, financial regulation funnels investment opportunities and funds into a zone where  relatively few firms are permitted to operate, enabling them to charge excessive fees. In other words, regulation designed to protect the consumer is actually underwriting "fat banking".

The cabal will only be broken up by opening the financial markets to everyone. The clear objective of the financial regulatory regime should be to deliver simple, low cost financial products that are accessible to us all.  Regulators should foster the growth of low cost 'facilitators' in the commercial and investment banking markets, to unleash the same trend that has enabled us to unbundle travel packages, music albums and personal loans to create our own personalised, lower cost alternatives.

The cartoon appears here.

Does Individual Empowerment Risk a Social Void?

Oikonomics makes the excellent observation that "We consume not to conform and be like (or liked) but to be different and thereby feel that in some small way we are in control of our lives...However," he warns us that "instead of pulling together we begin to pull in our own individual direction leaving a void in the social world that needs to be filled if we are going to meet the collective challenges of the sustainability of our way of life."

I agree that control over one's life is the motivation for consumption, but I believe this enhances, rather than undermines, our ability to meet the collective challenges of sustainability.

I agree that (except for fads/crazes like yo-yo's or cabbage patch dolls), we really only consume what is useful in solving/controlling a real problem, and the trend is towards more personalised solutions. The challenge for product providers is how to facilitate that desire in a highly flexible, adaptable, bottom-up way, rather than dictate how it can be satisfied in a top-down, one-size-fits-all fashion. Brands need to be facilitators, not institutions.

I agree that this trend represents a growing 'void', but only to the extent that one size no longer fits all. We no longer share the same TV schedule. We don't all have the same experience of any web-based service that dynamically serves its home page to each user. We've unbundled our travel and music. Our computers and smartphones are each differently configured with different 'apps' [who ever thought 'apps' would end up a retail marketing term?!]. Each social network service 'feed' is unique. We are ignoring traditional, formal politics and congregating around single interest campaigns and informal deliberative processes.

And I agree that this growing diffusion of consumer experience is undermining the sustainability of our [current] way of life. In fact the tools that are enabling this trend, unleashing our ability to escape the institutional view of the world, have been a catalyst for the bottom-up realisation that the way of life preached by our institutions has become unsustainable.

Yet, for all these reasons, I must disagree that the utter diffusion of consumer experience risks creating a social void that threatens our ability to meet the collective challenges of sustainability. If anything, the trend has put us in a far better position to face those challenges in a concerted fashion than ever before.

Discuss ;-)

Further Boost To Non-bank SME Finance

Last week, The Receivables Exchange secured $17 million in funding from Bain Capital Ventures.

I've been watching these guys since I learned of their launch in a response to my post about Zopa's trade finance efforts in November 2008. The coincidence was striking then, but even more so when they announced their integration with Ariba Network, the spend management services provider, in December '09.

Here's the video on how the Receivables Exchange works.

The key feature about this form of trade finance is that credit risk can be tied firmly to the buyer, rather than the supplier listing the invoice for 'sale'. There are various ways to understand and mitigate that risk, depending on the size of the buyer and whether it's listed/rated. I'll spare you the detail. Interestingly, the UK Treasury has just launched a consultation on how the government might support non-bank business finance, focusing on corporate credit assessment and transparency.

Of course, the primary challenge is one of marketing this model to enough time-starved small business owners to build 'critical mass' (an expresson I have come to fear and loathe) - hence the $17 million.

Definitely a space to watch.

A Fistful of Motorcycle

I shook off the chains of my regular commute last night to blast up to Bennington, where the church hall was packed to hear a talk by Austin Vince, renowned maths teacher, raconteur, authentic round-the-world motorcycle adventurer, author of Mondo Enduro and maker of the follow-up film, Terra Circa, about spanning the dreaded Zilov Gap in Siberia.

Austin has to be among the most entertaining speakers I've ever had the privilege to hear - ironically, more for the things he can't tell you than the topic of the evening, like his passion for spaghetti western posters. Yet his irreverent comparisons of life in far flung countries to daily English life are a tonic for the credit crunch blues. And his insistence that facing a challenge with nothing more than the bare minimum of equipment required, a sense of humour and a commitment to resourcefulness should be enough to inspire even the most dedicated 'weapon of mass consumption' to try eating life rare rather than well done.

Mondo Enduro traces the seemingly impossible round-the-world journey by a bunch of guys in their late 20's without experience, sponsorship, support vehicles, camera crews or even Ewan McGregor. I learned with some regret that it began in April 1995, a time when I'd recently arrived here at the same age, wondering what the hell I was going to do with myself. Listening to Austin, I could've done a lot worse than hop on a bus to Mill Hill that fateful April morning. 

Perils of Celebrity Nos. 642/3

I apologise for my party in this exchange with Harry Enfield at a "Mad Men"-themed party last night:

SDJ: Are those glasses part of your costume?

HE: No, actually. The shop assistant said they looked VERY COOL... which could have had something to do with the price tag, I suppose.... Of course, if I wore your glasses I'd look like Lord Archer.

SDJ: [laying on the irony with a trowel] Of course, you could make a lot of money looking like Lord Archer.

It might've ended there, except that Mrs DJ arrived:

Mrs DJ: [sticks out her hand] Macca! [mistaking the Comic Genius for an old friend and, as it happens, advertising account director]

HE: No, Harry! [shaking her hand].

Harry took it all in his stride, as one would expect. Very amiable, gracious and very entertaining. Funny that...