Bankloch

In my previous blog, " In the Blink of an Eye: How the Digital Age Intensifies the Risk of Bank Runs " ( https://bankloch.blogspot.com/2023/06/in-blink-of-eye-how-digital-age.html ) I discussed the increased risk of rapid bank runs in today’s digital age, particularly when customers hold substantial deposits in current and saving accounts, as they can be withdrawn almost instantly. Obviously   reject deposits is not a commercially viable option for banks . Therefore banks have to find a convenient way to convert excess (saving) deposits into alternative financial products, reducing the ease of immediate withdrawal and mitigating the risk of bank runs. This strategy is not only beneficial for the bank (as it reduces the speed of withdrawals), but also for the customer, who can profit from higher interest rates. Due to the   convenience of saving accounts , many customers are hesitant to move their savings into other financial products. While investing in securities is of cours...

In the financial sector, a significant number of employees work in the Customer Support (Customer Care) department. However, blogs about the financial (Fintech) sector often overlook this department, focusing instead on sales and IT. Instead Customer Support departments are often considered as necessary costs (a cost center) that should be minimized as much as possible. This results in   continuous neglect and relentless cost-cutting measures   in those departments. E.g. Outsourcing   to near- and off-shore countries Structural understaffing , leading to awfully long waiting times for customers. Low salaries , resulting in hiring profiles with little experience and expertise. Bad and difficult working circumstances , like Setting targets on   Average Call Time , creating pressure to quickly close calls. Leaderboards   based on the number of calls processed, fostering competition among team members. Monitoring and limiting break times Encouraging   multitask...

Recently several   medium-sized banks   in the US (i.e. First Republic Bank, Silicon Valley Bank and Signature Bank)   came into trouble , after their customers lost trust (i.e. the trust of being able to retrieve their money at any moment) in these banks. This resulted in an unstoppable and lightning-fast run on the bank. Analysts call the collapse of Silicon Valley Bank (SVB) the   first digital bankrun or also the first Twitter-fueled bank run . The incredible speed of this bankrun was in any case never witnessed before in the history of banking. In the largest bank failure in US history, i.e. the one of Washington Mutual Bank in 2008, customers took 10 days to withdraw $16.7 billion, while in the case of SVB $42 billion were withdrawn in a single day and another $100 billion were queued up for the next day. These staggering figures have   shaken up the entire worldwide financial system . In today’s interconnected world, where information travels at lightning...