> 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.

Yeah, I can agree with that.