JPMorgan Chase patted itself on the back earlier this year after announcing plans to close hundreds of branches and increasingly shift customer transactions to ATMs and online banking.
A deposit involving a human teller, the bank noted, costs it about 65 cents, whereas an ATM deposit costs just 8 cents and using a smartphone app lowers the transaction cost to a mere 3 cents. Chase figures these moves will save the bank about $1.4 billion.
And how much of those savings can customers expect to see?
“Probably none,” said Alfred E. Osborne Jr., a UCLA economist and senior associate dean of the school’s Anderson School of Management. “Prices only fall when there’s reasonable competition or reasonable alternatives, and you don’t see that in many industries.”
Banking isn’t unique on this score. U.S. airlines are raking in record profits thanks to near-full planes and way-low fuel charges. Carriers pocketed $25.6 billion last year, up 241% from the year before, according to the Department of Transportation.
The average domestic airfare, meanwhile, slipped just 8.3% to $363 last year from $396 in 2014.
According to Moody’s Investor Service, U.S. companies hoarded almost $1.7 trillion in cash last year — more than twice the amount they had stashed under their corporate mattresses before the Great Recession. Nearly three-quarters of all that money was kept overseas for tax-avoidance purposes.
Consumer spending accounts for about two-thirds of U.S. economic activity. Without us, business gets bupkis.
So it’s fair to wonder: Where’s our piece of the action?
“Absolutely, consumers are due for their share,” said Carmen Balber, executive director of Consumer Watchdog, a Santa Monica advocacy group. “All that profit comes from our pocketbooks.”
She pointed a finger at tech giant Apple, which was dubbed the “cash king” by Moody’s for sitting on $216 billion last year — almost all of it squirreled away overseas.
“Has the price of an Apple product come down in the last 10 years?” Balber said. “Not a dime.”
Apple’s chief exec, Tim Cook, has said he won’t be bringing any of that money back to the United States until the country makes the tax system friendlier — for Apple, that is. In the meantime, a top-of-the-line iPad Pro will run you more than $1,000.
Absolutely, consumers are due for their share. All that profit comes from our pocketbooks.
I asked Chase about the bank steering customers to cheaper-to-use automated devices. Will the hundreds of millions of dollars saved result in, say, lower overdraft fees?
Suzanne Alexander, a Chase spokeswoman, had an easy answer to that: No.
“We’ll be reinvesting the money,” she said. “New technology. New cybersecurity.”
And more money for shareholders. In May, Chase raised its dividend by 9%.
As for customers? No soup for you.
Alexander said Chase customers shouldn’t expect any reductions in fees as a result of all the cost savings.
Bank of America is being similarly aggressive in saving itself a buck. The bank announced last month that it plans to reduce its consumer banking workforce by thousands more employees and will focus on mobile and online technologies.
Citigroup predicted in a recent report that an industrywide shift to automation could lead to a 30% decline in banking jobs in the United States and Europe over the next decade. That would translate to roughly 2 million bank workers being handed their hats.
“The future of branches in banking is about focusing on advisory and consultation rather than transactions,” the report says. “Around 65% of banks’ staff are doing processing work that could be automated in the long term.”
All businesses experience change. I work for a newspaper — believe me, this is something I know a little something about.
But it’s striking to see so much corporate wealth being generated on the backs of consumers with so little prospect of consumers sharing in companies’ good fortune.
UCLA’s Osborne pointed out that some companies, such as Amazon, routinely pass along cost savings to customers.
“But these tend to be the companies that are disruptors,” he said, “the ones that are changing their industry with technology.”
Less-disruptive businesses seem content to keep the gravy to themselves.
Osborne said this likely won’t change as consolidation remains a mantra among business leaders. Telecom, healthcare, airlines, insurance — a dwindling number of players means fewer choices for consumers.
“Consolidation leads to oligopolies,” Osborne said. “Without competition and alternatives, companies know that they don’t have to share with customers.”
What can you do? I’d suggest you call the companies you favor with your hard-earned pay and ask why their profits keep going up but their prices never come down.
But we know what the response to that would be, don’t we?
“We are experiencing unusually heavy call volume. Please try your call later.”
Call centers and service reps cost money.
And this isn’t about your needs anyhow.
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