Do we need banks?

I am glad I wrote this latest blog. It has me thinking - Do we actually need a bank? Well lets consider what I actually use a bank for:
1. Retaining savings - as indicated I could care little about the interest on bank deposits, I seldom keep money in under-performing bank accounts earning 5-8% or less before taxes and inflation
2. International transfers - I could use Paypal to transfer money, but the issue is - from where to where?
3. Convenience of cash - OK this is a big issue. The banks have national branch networks and international affiliations that offer alot of convenience.
4. Stockbroking - Well it used to be nice using Comsec because it meant the proceeds from selling stocks went straight into my bank account. But I can use an independent provider like Etrade if the banks are going to get greedy.
5. Funds Management - Same deal as brokers - though I think its not good to use your bank as a fund manager. Thats just lazy investing because why would the best fund manager be the company that you happen to hold your savings with.
6. Bank loans - Well in this new financial market we now have alot of non-banks lending money to people to buy homes. Unlike banks they borrow from international capital markets. eg. Aussie Home Loans, Mortgage Estate, Wizard Home Loans.
7. Credit card - Well there are alot of institutions offering credit cards these days, eg. Virgin, etc So we dont need banks for that anymore.
8. Financial advice: Well a bank is the last place I would go for financial advice, but regardless there is alot of third party vendors and standards and codes of conduct have improved greatly.

I have pretty high demands compared to most people's financial institution requirements because I go overseas a lot, I trade stocks. If you are living a simpler life, you would be better advised to go to a local bank or credit union that offers better interest rates and less fees.

OK so we have established that I need a bank because the government has pretty tight barriers to entry. The payments system is currently pretty well dependent on banks. But I can see banks loosing their monopoly over money. How you might ask? See my Strategic Directions blog at http://strategicdirections.blogspot.com. I think there is alot of disgruntled customers out there who would readily abandon banks. Lets face it - banks long about signalled that they are not interested in small customers. Thats why they treat you with contempt. They are more interested in corporate deals, home loans and funds management. Managing your cash deposits is really a hassle they dont need. Thats why they charge you high fees for it. So don't use it.

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Andrew Sheldon www.sheldonthinks.com