At this point they, and other giants, successfully demonstrated that they cannot regulate themselves over these random terminations and that the public needs to step in.
Rather than further secure their market positions by forcing them to treat their customers well, why not replace the entire company by competition from less insane providers?
In some countries(UK) regulators recognized that you cannot operate in the society without a bank account. So a rule was made that a bank cannot close down your bank account without a court order. They can block your access to nearly all other services, block all of your cards, but at the end of the day, you cannot lose access to your basic bank account and money in that account unless a judge says otherwise. The solution to the problem of "every citizen needs a bank account to function" wasn't "let the free market sort it out". It was to force banks to maintain access to a basic checking account no matter what until a court order is given.
In my opinion, Google should be forced to do exactly the same - no matter what, you should never lose access to your google account without a court order. It might be placed under severe restrictions(no new uploads, restriction to storage etc) pending review, but until a lawful court agrees that you broke the rules somehow and google is free to kill your account? They should be forced by law to keep providing their service.
> you cannot lose access to your basic bank account and money in that account unless a judge says otherwise.
"Losing access to the money in that account" is blatantly stealing from you. It's should be obvious that no company should be able to do this under any circumstances, but that is a separate issue from the question of adequate competition.
You still need competition because a monopoly can find an unlimited number of ways to abuse their customers and regulators can only address the ones they foresee ahead of time.
> The solution to the problem of "every citizen needs a bank account to function" wasn't "let the free market sort it out".
Which allows banks to remain an uncompetitive yet inherently necessary market. But how is that better than having enough competition between banks that anyone can find one willing to provide service?
> Which allows banks to remain an uncompetitive yet inherently necessary market. But how is that better than having enough competition between banks that anyone can find one willing to provide service?
Just because the market is regulated doesn't mean there is no competition.
It's better because the banks can't gang up on you like tech companies do. At least in the EU.
But regulation is being proposed as an alternative to competition. It can't do that. You need competition whether or not you have regulation.
Look at what a dumpster fire every regulated private monopoly is. "Success" is a stagnant inefficient bureaucracy that ossifies everything it touches. Failure is the F-35 wasting a number of public dollars with twelve zeroes after it.
As a solution to this particular problem, not banking overall. And we're not talking about central banks, but normal banks. The competition is still there.
Tell me, why shops are not allowed to discriminate on the basis of race? Why not just have competition deal with that?
> As a solution to this particular problem, not banking overall.
Competition would work as a solution to this particular problem and overall.
> And we're not talking about central banks, but normal banks. The competition is still there.
Banks have notoriously high switching costs and barriers to entry. What competition would look like is a regulatory environment that enabled switching banks to be as easy as switching wireless providers after number portability.
> Tell me, why shops are not allowed to discriminate on the basis of race? Why not just have competition deal with that?
Originally, because white customers would refuse to patronize shops that served black customers, effectively acting as a monopsony (lack of competition) and the law was needed to restore competition.
Today, mostly for historical reasons. Do you honestly think that a black person right now would have trouble finding a restaurant to eat in even if there was no law forcing all restaurants to serve them?
> Do you honestly think that a black person right now would have trouble finding a restaurant to eat in even if there was no law forcing all restaurants to serve them?
No. My point is that it's not as big of a deal as you make it out to be. Competition didn't suddenly disappear because of that.
In the EU we already have the laws we're talking about, requiring banks to provide you a basic bank account. The competition between banks didn't disappear here either.
Also banking is not exactly a free market one way or another.
>>Which allows banks to remain an uncompetitive yet inherently necessary market.
I'm really curious what you mean here. Banks(here in UK) are stupidly competitve, there's constant offers and incentives to switch, I cannot imagine anyone in this country thinking "oh I would switch but they can't close my account so I won't".
>>It's should be obvious that no company should be able to do this under any circumstances
Are you familiar with a small company known as PayPal? Where they can lock your account for 6 months without providing any reason whatsoever and you don't have access to your funds? You can't dismiss a real issue by just saying "it should be obvious". Sure, it's obvious but the only way we stop this from happening is through regulation.
> I'm really curious what you mean here. Banks(here in UK) are stupidly competitve, there's constant offers and incentives to switch, I cannot imagine anyone in this country thinking "oh I would switch but they can't close my account so I won't".
How competitive a market in is fundamentally a question of how hard it is to switch. So probably the most uncompetitive market in the world is iOS app distribution. Because if you don't want to use Apple to distribute your iOS app, you not only have to create your own app store, then you have to create your own OS, and hardware competitive with Apple's, and convince enough other developers to use your store that it can attract users, and then attract all of the users.
A great metric for how uncompetitive a market is would be how much profit the incumbent makes, and you'll notice that Apple as at the top of the market cap list. Because otherwise price competition would drive down margins. But you'll notice that banks are not exactly scraping by either.
Because switching costs are high there too. You want to switch banks? Go fill out HR paperwork at work to change your direct deposit to the new bank, otherwise the new bank charges a monthly fee. But wait, now the old bank charges a monthly fee without it, so you need to get everything else switched right away.
Everything else is quite a list. Every separate business you have recurring payments set up with. Mortgage lender, student loans, power company, water company, cable company, wireless company, car insurance, homeowners insurance etc. etc. You're going to be screwing with this for hours, might as well stick with the existing bank unless they're actively in the process of murdering your dog.
And then they don't have to compete with each other on the metrics that really matter. Notice that it's all up-front switching gimmicks and introductory rates, because once they've got you, you're stuck.
> Are you familiar with a small company known as PayPal? Where they can lock your account for 6 months without providing any reason whatsoever and you don't have access to your funds? You can't dismiss a real issue by just saying "it should be obvious". Sure, it's obvious but the only way we stop this from happening is through regulation.
And this is a failure of both regulation and competition. It's just another example of regulation without competition being insufficient.
Notice that competition could solve this, if it was present. But the switching cost for a merchant is even higher than it is for a buyer. You have to get all of your own customers to switch to a different payment provider, of which there are many more than your typical individual has utility bills, and with no guarantee that they would all even be willing to switch.
The primary goal of regulation should be to create a higher level of competition than this, because once you have that, the competition itself solves >99% of other problems.
How long do you think Paypal would be arbitrarily freezing accounts if it was trivially easy to move all of a merchant's own customers to a different payment processor, so that the first time Paypal froze a customer's money they lost two thirds of their merchants to a competitor?
Example of a regulation that would actually help in banking, because it would increase competition: Bank account routing number portability, so that if you move to another bank, you can keep your routing number and all of your recurring payments still work against the new account.
Or for Paypal, a standardized public vendor-agnostic money transfer API, so that vendors and buyers don't have to use the same payment processor and vendors can switch from one to another without their customers having to do anything.
>>And then they don't have to compete with each other on the metrics that really matter. Notice that it's all up-front switching gimmicks and introductory rates, because once they've got you, you're stuck.
Well, again, in the UK switching couldn't be easier. You basically tell your new bank who your old bank was, and they handle the transfer entirely without any bother for yourself. They move over all direct debits, regular payments, and for at least 6 months after the switch any money going into your old account is automatically routed to your new account. The only possible bother is yes, telling your employer that you changed accounts, but that's the only thing I can possibly think of. The cost of switching banks in UK is practically zero, or very close to it.
>>Or for Paypal, a standardized public vendor-agnostic money transfer API, so that vendors and buyers don't have to use the same payment processor and vendors can switch from one to another without their customers having to do anything.
It isn't this regulation that makes the bank uncompetitive, it's all the other regulations that make banks uncompetitive, i.e. hard to switch between and have high barriers to entry. Without that, this regulation would be unnecessary because you would find a dozen other banks willing to take your business and switching to them would be no more than a minor inconvenience.
> if push comes to shove, go to a branch and withdraw your money in person.
When I was starting out in my IT career, the nearest branch of my credit union was more than an hour away by car, and for much of that time I didn't even have a car. If my credit union had restricted my account to "thou must visiteth a branch and speaketh with a representative", I would've been screwed - on a level of "freezing and starving".
> transfer your money out through the mobile app or website;
Assuming this wouldn't be one of the first things shut off alongside the card.
When I first signed up for that credit union (right after I graduated high school) it was a 5 minute walk from where I lived. Then I moved, because I couldn't find work in my hometown.
I could've switched banks, but the only option in my new town was Bank of America, and after they screwed my folks over I'd sooner store my money in a mattress like my great grandma did in the Depression than trust my money with them.
