Why Letting Banks Fail Is Actually Good For Real People

by cameron | Jun 15, 2009 | banksters

Continuing our theme about banks this week, a friend sent me a link to the ChangeThis site which has a manifesto from Douglas Rushkoff. Here are a couple of excerpts:

“As the financial institutions we have come to rely on appear to topple under their own weight, it’s only natural that we rush to support them. These are the banks, investment groups, and insurance firms to which we have outsourced our savings, financing, and investing. They fund our businesses and lend most of our currency into existence. Were we just a bit more aware of how this dependency developed, however, as well as what it costs us in the long run, we might choose instead to exploit their temporary vulnerability toward very different ends. Indeed, if we had our wits about us, we would seek to put our biggest banks out of our misery, for good.”

"The failure of giant banking is less a crisis  than it is an opportunity to rediscover the long lost art of local commerce."

Download the manifesto.

The Govt Hates Banks Too

by cameron | Jun 15, 2009 | banksters

The Commonwealth Bank announced that it is raising interest rates by 10 base points (which is 0.1% to the rest of us). Deputy prime minister Julia Gillard called CBA “selfish” and Community services minister Jenny Macklin said mortgage holders had every reason to be furious with the Commonwealth Bank.

Remember that this bank used to be owned by the Government until it was privatized by the ALP under Paul Keating.

Commonwealth Bank announced on 11 February 2009 a net profit after tax of $2,573 million for the half year ended 31 December 2008. This represents an increase of 9 percent on the prior comparative period.

However it has a Net Promoter Score of -40. MINUS 40! Companies obtain their Net Promoter Score by asking customers a single question on a 0 to 10 rating scale: “How likely is it that you would recommend our company to a friend or colleague?”Based on their responses, customers can be categorized into one of three groups: Promoters (9-10 rating), Passives (7-8 rating), and Detractors (0-6 rating). The percentage of Detractors is then subtracted from the percentage of Promoters to obtain a Net Promoter score.

According to the NPS site, “Banking had an average NPS of approximately 15%.”

Now, I’ve had a few people say “but their shareholders are happy”. Sure. For now. What’s important to understand, though, is the concept of “Good and Bad Profits” (as Jen Storey mentioned on last week’s banking show).

To quote again from the NPS site:

The right goal for a company is to deliver customer experiences of such high quality that customers recognize the value in the relationship and become Promoters. These Promoters generate good profits and fuel true growth. They become, in effect, part of a company’s marketing department, not only increasing their own purchases but also providing enthusiastic referrals.

By contrast, companies can boost short-term profits by exploiting customer relationships, raising prices when they can get away with it, or cutting back on services to save costs and boost margins. Those practices boost bad profits by extracting value from customers at the expense of loyalty, creating Detractors. Companies can not achieve long-term sustained growth on the basis of bad profits.

Which basically translates like this:

If you screw people over to make more money, it will catch up with you sooner or later.

Congratulations on the -40 score Commonwealth Bank. You must be really proud.