Ten years ago Bill Gates said that U.S. banks were “dinosaurs". Most of us at IBM thought at the time that this was a harsh comment for an IT industry executive to make about it’s customers. However, at this stage, I have to admit that I am quite disappointed with the progress made in the banking industry. Yes, there is a lot of online banking but there still remains a huge amount of paper, faxes, forms, and hassles.
One of the areas that is overdue and ripe for automation is the bank "wire". Whether you have the money, borrow the money, or are receiving the money, it is often convenient to move the money using an electronic funds transfer — otherwise known as a "wire". A bank wire moves money from your bank account to a car dealer’s bank account, a home equity loan account to pay off a bank loan or for a real estate closing, or from your bank account to a son or daughter’s checking account for college expenses. Paypal has made moving money really simple — a few mouse clicks to send or receive payment from an eBay auction. In the world of banking, it seems the goal is to make moving money as hard as possible.
A recent real estate closing convinced me that my bank (a large national one) is truly behind the times. Like the majority of their peers, they seem unable to adapt to the Internet. There are regulatory compliance issues but I am convinced these serve more as a crutch — an excuse — to not change faster. Here are the instructions provided to customers who want to make a wire transfer.
In order to make a wire transfer the customer must get "All Wire Forms and necessary paperwork" to the "Risk Management Area" by 3 PM the day prior to the day of the transfer. The overnight package must include "original signatures" and a "copy of a valid driver’s license". If you get through all the hoops the wire goes out the on the third day of the process. But before it goes, and for "further protection", the bank calls and asks a bunch of security questions and the amount of the last check drawn on the account "prior to completing your wire transfer". If you happen to be traveling and can’t take their call, the wire does not happen.
You can buy or sell merchandise and trade stocks online but when it comes to moving money, the process is incredibly cumberssome. Is the bureacracy really "for your protection". I don’t think so. It is culture and unwillingness to change. Is a really secure electronic funds transfer online possible? Of course. There are numerous technologies available to implement encryption and authentication, including biometric identification such as on the Lenovo ThinkPads. Even the IRS has implemented a secure approach for e-filing tax returns. Tens of millions of people use it. It works.
To add insult to injury I received a letter in the mail the other day from one of the largest banks in the world. "It is our policy to reconfirm the following wire instructions" which they have on file in case they are needed. The letter contained my name, address, phone number, the ABA routing number for the bank, and my bank account number. The letter opened with "For your protection". So for my protection the bank sent a letter through the postal system with their name emblazoned on the envelope containing a lot of valuable information that an identity theft would love to get their hands on. A major source of identity information comes from thieves going through physical mailboxes looking for letters from banks. People have to buy shredders because of their banks. Do the banks have privacy policies? Yes, and most of them say in essence, we have your information and we will use it to develop new business and we will share it with our partners. If you want to "opt out" you have to write them a letter. For their protection.
Epilogue: Ten years ago, some predicted that "local" banks would be gone by now. Today they are flourishing. People know their local banker and if they need a wire, they just call and it gets done. Authentication gets done because the people know each other.