Whether or not you toil every day in the banking industry, you know that many consumers are fed up with the squeeze they feel from their financial institutions squeezed into longer lines at fewer branches, with fewer staff; squeezed by financial incentives to de-humanize banking in favor of electronic commerce and “fast-food” banking; squeezed by the narrowing of choice.

Those clever ads from one of our competitors ring true for many and, unfortunately, it’s going to get worse.

And for competitors of Goliath institutions, the squeeze on the Davids of the financial services industry has the potential to be overwhelming. For the Goliaths, the control of vast market share and volume, the efficiencies of leverage across an enormous base, and the ability to dilute risk over this base allows them great latitude to choose their points of attack.

Be it pricing, risk characteristics or product features, the Goliaths have great power to squeeze the competition.

Consumers grow tired of being told their old bank has a new name (and new fees) because it was acquired by a competitor. They feel personally violated when they are charged an extra $1.50 to withdraw money from an ATM.

And some, I suspect, still want to be able to walk into their local branch, ask someone a question, and get an answer then and there (without being charged).

Unfortunately in California, despite the tumult caused when First Interstate was gobbled up by Wells Fargo, we’ll now witness more of the same, this time among thrifts. And what will dwindle in the process is consumer choice and the number of bankers who still place a high value, and have the capacity to deliver, vintage customer service.

The proposed merger of Great Western and Home Savings or Washington Mutual or First Bank Systems or You Fill In the Suitor’s Name, will once again send legions of merger-weary customers scurrying away from the combined financial institution.

Again, these consumers will be in search of an ever-decreasing number of California banks that promise a high degree of service and real customer stability. Such institutions do exist, but you have to look a little closer to find them.

While this latest merger, of course, will be positive for shareholders of the two institutions, it will once again squeeze the customers into fewer offices and into product, pricing and delivery models they did not buy into.

While any business person supports measures that enhance shareholders’ value, especially when it involves cutting costs and improving efficiency, such measures must be balanced by the impact on customers.

The types of mergers we are seeing in California financial services results in a squeeze to fewer branches and a concentration of banking into still fewer institutions, squeezing choice and competition. It also increases the susceptibility of the California market to the favored credit appetites of fewer institutions; should one or more disfavor an economic segment, be it real estate (which we all remember), high tech, entertainment, or any other you care particularly about, the potential to squeeze the vitality out of that segment is more concentrated.

What used to be eight major banks in the state are now four Bank of America, Wells Fargo, Union Bank and Sanwa Bank California.

However, these mergers also allow other banks to again seize the opportunity to increase market share among both personal and business customers throughout the state.

These banks last took advantage of such a merger scenario when Wells Fargo acquired First Interstate, and before that Bank of America and Security Pacific.

All of us in the banking industry know how difficult it is to get consumers to switch their banking allegiances once they have established accounts, even if they are unhappy with the service they are receiving. But, when forced to change to a new bank through merger or acquisition, suddenly there is a window of opportunity for banks like us to snare them.

Interestingly, the recent bold attempt by Bank of America, Wells Fargo and Home Savings to penalize non-customers who dare to use their ATMs with an extra surcharge of $1.50, which they believed would force our customers to become theirs, may instead create another opportunity for the smaller yet more customer friendly institutions to win new customers, as well as public opinion.

Observers might look upon the transformation of banking like a balloon. If you try to squeeze the air out of one place, it pops up in another. As all of the customer and competitive squeeze in banking continues to take place, it will be interesting to see what pops up in new places new competitors, new products and, perhaps, a whole new perspective of what banking will be in the future.

Howard Gould serves as vice chairman and chief administrative officer of Sanwa Bank California. He is the former California state superintendent of banks.

No posts to display