In this time of the Great Unpleasantness, when recession has bankers and other assorted financial services and real estate professionals in a funk, it’s comforting to remember the Good Ol’ Days.
Ah, the good ol’ days, before Bank of America was renamed Bank of Western North Dakota; before Citibank was renamed SmallRuralVillage Bank.
In those days of old, life was good and banking was bubbling with new ideas and innovation. The only toxic asset was the hangover from the three-martini lunch celebrating the latest deal.
No idea was beyond consideration. Do you remember when the hot strategic plan was to transform ATMs into all-purpose dispensing devices, offering coffee with your cash; offering to pay your utility bill; providing the latest Las Vegas spread on the Patriots game?
One suggestion was to let the ATMs sell lottery tickets. Yes, it was banking in the good old days, when nothing was beyond consideration.
I Get Misty…
Of course, we do tend to exaggerate the merits of the good old days. Consumers were hostile to ATM fees, on the theory that the bank customers were merely withdrawing “their” money. It was a fascinating notion. The ATMs were given human characteristics, such that they could reach into particular bank accounts at particular banks, lift out a fist full of twenties, and hand it over to the rightful owner.
As recently as last fall, a public opinion survey commissioned by Compass Bank asked whether ATM fees or lottery tickets were a “bigger waste of money.” By a 63 to 37 percent margin, the Great Unwashed voted for ATM fees.
Put aside for the moment the weirdness of feeling more guilty about paying a nominal fee for the convenience of withdrawing cash than about taking a flyer on a 400-zillion-to-one shot. If there’s a lesson from this, it may be that the strategic planners were right: let the ATMs sell lottery tickets, in an orgy of wasted money.
To be sure, there was more to the old ATM business plan than the fee income. The big banks dreamed up the idea to give their own customers ATM access for free – which left the smaller banks at a competitive disadvantage when Ma and Pa Kettle traveled far, far away – and could only get cash for a price, at some other ATM.
There was that messy business in the recent past when American bank ATM charges and foreign bank ATM charges got so high that some American tourists never made it home from vacation. They’re still in Bulgaria, washing restaurant dishes, trying to pay off their ATM debt.
Herding Sheep
Perhaps the real lesson of the ATM-fee resistance is how sensitive consumers really are to economic incentives and disincentives. As the mortgage monstrosity of late has pointed out, if you make a deal that is breathtakingly attractive, consumers (be they deadbeats or not) will come knocking on the door.
This winter, as part of the nation’s art-friendly initiative, France opened up art museums, free-of-charge, to French students and teachers. Notice, the offer was not a reduced rate; one suspects there was fear that even a modest cost would be too much.
Not so, the Red Sox, of course. With limited seating, an affluent population, and the mental illness that affects sports fans in Massachusetts, ticket prices can go up and up, like some out-of-control ATM fee in a foreign land – with little or no impact on demand.
Even (or perhaps, especially) “public service” tends to respond quite nicely to traditional economic incentives. In the face of a Massachusetts wedding crisis, the state bumped up the fee that justices of the peace can charge to $100 from $75, and from $100 to $150, if travel is involved to some exotic place like Springfield, wherever that is.
Where the economic incentive-disincentive balance gets a bit peculiar is in the universe of government “sin taxes,” which benefit from sinners who drink and smoke and stuff, to the benefit of government, which claims it is discouraging sinners from sinning, by raising the taxes.
In Washington, State Rep. Mark Miloscia has proposed an 18.5 percent tax on pornography. If tax revenue goes up, should the state celebrate? That would be obscene. Oops.
