We’ve seen the so-called challengers like Metro Bank and Virgin Money with their sleek, well-lit branch networks and customer-friendly opening hours.
They were certainly much more attractive than the lackluster banks we were used to, but that doesn’t seem to have helped them win over many customers.
There’s been a wave of app-based banks like Monzo or Revolut raising a ton of venture capital money.
They certainly offered smart smartphone software and were much easier to use than anything we’ve seen. But again, they barely took over the industry.
There were the peer-to-peer lenders like Zopa that promised to use the internet to cut out the middleman, but most of them have since morphed into regular, not very big banks.
And of course there were the investment banks who seemed to have assumed that their brains and aggressiveness would make it easier to carve up the market. Very soon, internet giants such as Amazon and Apple will also try it.
None of them really worked. In reality, retail banking is an incredibly difficult industry to break into.
There are three reasons for this. First, the margins are too thin. In theory, a bank should be able to collect many small deposits for very little and then lend out the same money again for much more.
This certainly seems to have been Goldman Sachs’ main ambition. He no doubt had a lot of fanciful plans for all that money Marcus would be vacuuming.
In reality, it’s a lot harder than it looks.
Collecting millions of small deposits is hard work, and lending money to people who can repay it is even harder, and the difference between the two is usually minimal.
This was especially true when interest rates were close to zero, but it won’t be any better when they are back to 5%.
Then it’s too dull. It is possible to get people excited about a new car. Or a flight to a warm place. Or a new chocolate bar or a streaming service. But a bank account? Not really.
If you can’t get people’s attention, it’s impossible to get them interested in trying something new.
Finally, the switching boredom is too great. No matter how easy you try to do it, hardly anyone can care to change all those standing orders.
Endless money laundering regulations have not helped much.
By the time we found three utility bills and had our passport certified, most of us lost the will to live, not to mention any interest we might have had in changing our bank account.
Add it all up, and it’s the Fort Knox of big business.
Established giants can be boring and unprofitable. They have customer service that often seems straight out of the Soviet Union circa 1955 and, as a succession of overselling scandals have shown, they treat their customers with contempt.
In the end, none of that really matters. Challenger after challenger is thrown and quickly falls flat on his face.
If even Goldman can’t make it work, no one can. In reality, existing lenders are, well, as sound as a bank – and that’s not going to change anytime soon.