If you have been following this blog for a long enough time, you probably know I “enjoy” writing about banks, or at least I end up doing that quite a lot, whether I enjoy it or not. Part of that it’s because I still find myself reason about money the way I did when I had my own company, and part of that because, well, I have opinions of what good banking looks like to me. Part of the reason why I have that opinion, is that I have seen a lot of what good banking is not, and it gives me material to keep writing.
Of course, I’m also lucky because I have at this point seen how banking works (or fails to) in multiple countries, and I can at least compare the point of view of an user in those contexts. I don’t have any idea how this works from the other side of the fence of course, as I have (thankfully) never worked for a financial institution. Not that I haven’t considered that (hey, I live in London after all), but then I remember that I would probably be finding that things are even more screwed up than I can see from the outside, and decide to put my savings into gold bullions — as it stands, I just keep getting depressed by everything tech, and been considering turning to opening a coffee store and bakery.
And I do mean it, when I say that different countries have… pretty much nothing in common when it comes to banks and banking — costs, services, expected behaviour and contacts. Some of it appears to be so entrenched culturally, that suggesting changing something would be probably considered heresy.
In Italy it is (or at least was) common for current accounts to have a monthly fee, although somewhat nominal, and this usually doesn’t include much more than a bank card. I used to have a cheques book — but only because at the time, my family used to use those for a lot of things. I think I only ever used once, and I’m not remembering what for.
Outbound wires were expensive back when I was using them, raising in price over time, and differed whether I would be wiring to the same bank or to a different one. Cashing in cheques was free, as long as they were in the same currency, while receiving inbound wires depended on both currency and source of the wire — when I was a contractor working for Google on ChromeOS, the invoice payments arrived in dollars, but from within Europe, and they didn’t cost me enough “to notice”; when I received the payments from another customer, they dropped hundreds of euro on the bank’s coffers — which is why I am happy that TransferWise exists now.
While Italy had early federated ATMs that allows you to access your money at any time, there is one thing that I have noticed is not common elsewhere: accessing ATMs outside of your bank’s own is generally a paid option. And I don’t mean that in the USA sense (that I’ll get to later) of ATMs that charge you a fee to use them — I mean that the bank will charge you a fee to use an ATM of a competitor. This got to the ironic part where, when visiting Italy after moving to Dublin, it was cheaper for me to use an Irish debit card to get some cash out of a machine, because my Italian bank didn’t have any ATM in an easily-reachable place for me to use. This might be annoying to me, but it’s a significant pain for people like my mother who don’t drive, and that need to be driven to another town to find a free machine.
Another interesting note about Italian bank cards is that, up until very recently, were not usable online. I think nowadays most banks have at least a paid option to give you a normal Visa or MasterCard debit card, but for a long time you ended up with cards that couldn’t be used online at all — even when they had 19 digits on them for the Maestro circuit. Indeed, back when I hit these issues I did ask whether I should have gotten a VPay (Visa’s answer to Maestro, before Visa Debit), but I was told that that would have been less accepted in Italy itself.
Credit cards are still uncommon — before bank cards could be used online, the vast majority of people I knew who made purchases on eBay would be using pre-paid cards (Visa Electron or MasterCard Debit), that you topped up for a fee. The most common one at least back then was issued by the Italian post (Poste Italiane), under the name PostePay — it was also one of the biggest scam targets for many, as many eBay sellers would pretend that the PostePay logo appearing on the announcements meant that they would pay directly to a pre-paid card, rather than through PayPal – a great scam, since eBay can’t see the money changing hands, and won’t protect you from fraudsters. At least they seem to have abandoned chip’n’sign.
On the other hand, direct debits have been a thing for a long while… although that became an issue when SEPA Direct Debit became a thing. Indeed, the old Italian direct debit system was advanced enough (and similar enough to the SEPA DD Core specifications) that it appears most banks and operators just re-used the same infrastructure, just changing the size of the fields used as parameters. This worked well as long as you were not trying something as silly as direct-debiting an Italian utility to an Irish bank account or vice-versa. And I know that because I tried.
To be honest, though, not everyone is using direct debits still. Before my parents split up and I started being the one paying for the bills, my father insisted on not using direct debits at all, and instead paid the bills at the post office — and since a number of times the bills arrived past due, we ended up paying quite a lot of money in interests. The pay-to-the-post-office thing is also a fairly standard concept of Italian culture, at least up to the ’90s. I don’t think any of my age-peers are doing that anymore, particularly because post offices are pain to get to: in many town you can only get to them in the morning, and not over the weekend.
Indeed we got to the point that a lot of banks offer (or at least used to offer) a postal payment service so you could put in your request for a postal payment online… and then receive the paper receipt by snail mail, because what they pretty much did was forwarding the request to a local post office, with batch-printed money order forms!
Given the fact that Ireland is part of the EU, and thus SEPA, you may think that things are mostly the same between Ireland and Italy. You would be wrong.
First of all, bank accounts in Ireland are a mess to choose from, because none provides any decent service. The one account I was given when I landed, through Google on AIB, was one of the most commonly used one, and required €2500 in the account at every single day of the quarter, or otherwise it would charge you for each operation you took… including received wires. Note that this is a daily minimum and not an average-over-the-quarter, like the equivalent would be in Italy. And goes without saying that it’s a no-interests account, so you need to put some money “to sleep” to avoid being charged through the nose.
The last account I settled on was an Ulster Bank premium service account at €36/month. It actually paid for itself in terms of a lot less time spent dealing with straightening things out (after a horrible situation with KBC, I really wanted someone that could do that stuff for me). And it came with a secondary Sterling account (via Ulster Bank Northern Ireland — I still have that account!), as well as a savings account and credit card.
Thankfully, Ireland abandoned the country-limited bank card system called Laser before I immigrated, in favour of using more standard Visa Debit cards. With the exception of KBC that, as far as I know, was the only issuer of MasterCard Debit bank cards. A number of other non-bank services issued MasterCard Debit cards: Revolut, Curve, and An Post’s money exchange services — the latter being ironic given that An Post was the only place I knew of that did not accept MasterCard Debit cards, only Visa Debit.
As far as I know, none of the big banks issue bank cards that have fees to take money out of a non-bank-owned ATM, to the point that I never bothered to go anywhere else but the two Spar supermarkets around my place, when I needed cash.
Direct debit is the norm, although some system of postal payment is still present, and a number of bills would have the details printed on the bottom. Ironically, it’s because of that, that once I leaked my own credit card number. Overall, the Irish banking system appears to me fairly straightforward, with most payment being executed electronically, and widespread card acceptance.
An interesting note about direct debits is that, despite nominally being part of the SEPA Direct Debit Core system, they appear to be vastly region-locked. I had to threaten Tesco Bank (before they sold their business to AvantCard) to bring it up with the regulator when they refused to let me direct debit an account with a non-Irish IBAN, and Ulster Bank (Ireland) didn’t budge even then. A few of the utilities, also, appear to still be unable to change the direct debit dynamicall: you instead choose how much you want to pay, and then they will issue you a statement to show how much in credit/debit you are.
What I would say is still Ireland’s biggest problem when it comes to banking is the lack of competition. It’s the reason why Revolut actually works well there: there is no high-street competition and those who are used to different level of service will go straight to FinTech offers. My impression is that the reason for the lack of competition is that it relates to the way folks stick to the bank their parents used, something that I have encountered in Italy a lot as well.
I nearly titled this section United Kingdom, but then I realized that there are a few things that don’t quite work the same way throughout the country. Which is something that became very apparent when I transfered from Dublin to London: in the Workday interface, when it asked me for a “UK bank account”, I provided an Ulster Bank (NI) account number, and that had me wait for another two weeks (with a roundtrip to payroll to change my account on file), because Northern Irish bank accounts are not compatible with most English payment systems, it appears.
On the bright side, the competition between banks is fierce, although there are a number of “branded” accounts that consumers don’t always notice are operated by the same institution. There are also free-by-mandate bank accounts made available by a number of well-known banks, although that is becoming an increasingly limited space.
In my experience, this is one of the most consumer-friendly banking system, with payments between accounts, whether private or business, being free or nearly free, and direct debits being ubiquitous. The best of all is that so-called “Faster Payments” transfers appear on the credited accounts nearly instantaneously, in a matter of minutes if not seconds, without any surcharge. Italy does have similar fast payments, but in their case, it usually comes at an additional cost.
Otherwise, the English system looks a lot like the Irish one, at least for now. Bank cards are issued usually on the VISA network, although I know of at least one bank issuing Mastercard debit cards. More recent ones stopped providing the embossed digits for the fully-offline usage, which is fair as the only place that I saw using those in the past few years has been a hotel in Tokyo.
Credit cards are an intersting story here. They are not expensive, honestly, but they are very, shall we say, selective. If you just moved into the country, you’re not going to get a credit card for a number of months, which is again similar to Ireland, although I did manage to get one relatively fast with American Express (which, of course, is not cheap by itself). Once you’re allowed to get a card, the price of it is usually recovered by cashback. Or you may choose to get one of the cards that cost nothing but don’t get a cashback at all. Personally, I decided to get two cards: Santander’s with generic cashback, and Amazon’s (by NewDay) with Amazon-only, points-based cashback; the former is paid back by the regular payments we have on it, and the latter was free, and adds up a few scores of pounds a year.
Compared to the time I spent there, the one thing that England appears to have that Ireland missed (and, as far as I know, so does Northern Ireland), is the concept of “retailer offers”. For those unaware of these, many banks include “selected offers” with their bank accounts or credit cards, which you usually need to explicitly opt into. The way you do that, is usually through their normal mobile banking app (or website), although I think a couple of banks have separate apps for those.
These offers are usually in the form of anything between 2% and 10% cashback for purchases over a certain amount up to a maximum. Depending on the bank, these are offered either in actual cash, additional “points”, or separate “rewards balance”. This is where things get interesting and complicated, because you end up having to keep in mind which card/account has a certain offer, and you end up then deciding which one to use to pay at a certain place depending on that.
To make the calculation more complicated, the rules are also different between these. My bank (Santander) has a single set of offers on the account, which applies to debit and credit cards alike. And if the offer is for “one-time”, it is consumed as soon as either me or my wife use the card for an eligible transaction. On the other hand, American Express applies the offers on the card, so both of us need to check our app for valid offers, and one-time offers can be used once per card (very useful for offers that instead of a percentage, give you back a fixed amount, like the yearly “Shop Small” week — fun fact: in the beforetimes, it confused a lot of waiters when we would decide to split the bill, particularly when our wedding rings are clearly visible). But at the same time, the banks’ offers can be combined with Airtime Rewards, so you win some, lose some.
Direct debits are another area that includes some calculation space, and some similarities with Ireland. The number of utilities using fixed direct debits is significantly lower, but it’s not entirely uncommon either. On the other hand, a few banks (including Santander) do apply cashback to (certain) direct debits. Or they may decide to give you perks as long as you have direct debits set up. This provides a gameable system: particularly when accounts suggest you can get perks as long as you have two direct debits, you can take a look at your periodic payments and, if they do allow PayPal, you can use then turn a periodic payment into a direct debit. For instance, you may have Spotify and Netflix as those direct debits.
My short version of an impression of the English banking system is of one that is perfect if you are a fan of strategy games or RPGs where you can spend a day just calculating the possible weapon/armor/enhancement combos. You can then decide to squeeze all possible combining offers, get the best exchange rate for each purchase, and so on. If you are not into these trickeries and calculations, well, you can still get a pretty much no frills account and be happy knowing that they are not really mugging you of a lot of money.
What is possibly the most annoying thing, is that the security of logging into the online banking options is fairly horrible. England (and Ireland too) is the home of “Please give us your 3rd, 7th, 38th character of your password” requests, which are horrible security theatre, and add nothing in terms of security, since transparent phishing proxies are not uncommon at all.
For this country, I only have a passing knowledge of the banking system, since I have never lived there proper, but I do have a bank account, so I have experienced some of the workflows, and I can compare notes with a few people I know that have lived there.
The first thing everybody will tell you about US banking system, is that it still heavily relies on paper cheques. Yes, the same cheques that had the main spotlight in movies such as Catch Me If You Can (which in my opinion is a great movie, by the way). What has changed since the time of that movie is that there’s a lot of “virtual process” around cheques in the USA, something that I don’t think other countries have done, for good or bad.
So for instance, I have received myself a few US cheques (mostly as rebates for goods I bought in the USA); to cash them I didn’t have to wait for my next trip to the country: my bank (Chase) allows me to scan the cheques front and back with their mobile phone app and they consider that good enough that I don’t have to present the original to any one at all. I could literally take the cheques and frame them, if they had an emotional meaning for me (they don’t, and I didn’t). And I’m told that on the other hand, you can ask your bank to print out a cheque for you via their online banking, and they will post it out for you just fine. I’m sometimes scared by this strange paradox of still using cheques, but beside being reminded of the William Gibson quote («The future is already here, it’s just not very evenly distributed»), I can only shake my head and thank the luck that “my” banking system doesn’t require me to deal with this.
Electronic payment in stores appear to be also unevenly distributed. While I had no issue with paying by card in most places I’ve been to, in either California, Pittsburgh, or New York, there appears to be still a lot of services that are cash only. One of them, ironically, in Mountain View: Dana Street Coffee Roaster serves really good coffee, but I don’t usually keep cash at hand (except if I’m going to The New Mongolian Barbeque), which is why I usually just hang out at Red Rock unless I’m with a local.
There is also the elephant in the room, that only recently the United States have introduced chip-and-pin for points of sale around the country, and the last time I was there, a lot of them still didn’t support it. The reason for that appears to be related to the way point of sale devices are handled in the USA, where a lot of vendors actually bought the terminals, rather than renting them from a bank or payment processor. This is unlike Europe, where as far as I know, most banks will sign you up as a customers and provide you a leased terminal, which they take responsibility for updating and replacing as needed, which allowed the deployment of new technologies such as chip cards (with either PIN or signature) and NFC payments in a much shorter order than across the pond.
Payments, particularly consumer to consumer, are a mess. The whole concept of direct bank transfers is not something you can consider in the USA, with wire transfers costing $25 at both ends of the transaction (depending on banks and other rules). This may give a bit of context on why Silicon Valley appears to want to reinvent payments every year, with new methods to “attach money” through all kind of messaging platforms, and why people still attach themselves at the idea of bitcoin solving problems related to instantaneous transfers among peers.
On the other hand, online banking systems appear to be a lot more sensible when it comes to login security than European banks. Chase even supports proper password managers in their login both on the website and on the mobile app, which is unheard of in the countries I lived in here in Europe. And they even will use email for OTP rather than the silly SMS. It also appears that retailer offers exist in the USA as well. Chase is always trying to sell me a Dropbox subscription, with a 15% off (and TurboTax, although I don’t actually owe taxes in the US so that would not be particularly useful).
This is by no means a complete and detailed comparisons of all these banking systems. It is most definitely biased and partial, particularly given, as I said, I have not lived in the United States, but only experience it as a passerby.
I have not covered the different credit score systems of these countries (among other things because I do not have a credit score in the USA at all), nor I have talked about how to get loan or mortgages (the latter of which, I never tried getting anyway). All of these are extremely important components of a banking system and they, more than the services to consumers, should be considered when debating its health.
I just find this particular field interesting, and I think that reading more about other countries banking systems might get people to pay more attention to the horrible technological solutions they come up with. Nobody cares about cryptocurrencies for money transmission in Europe because SEPA means you can transfer money for fees that are pretty much nothing by comparison with your average crypto transaction. Noone had more than a passing interest in “attaching money to Gmail” outside of the USA.
I honestly open that in the future I’ll get to know more banking systems. It would mean indeed moving again, but I think it would be interesting to see different parts of the world, too.
Finnish system has these peculiarities (non exhaustive):
– You can receive invoices to your online banking
– Your online banking credentials can be used for sso to third party websites
So practically while SEPA is nice these kinds of features still heavily direct towards having a local bank account.
In the US, there was the great “liability shift” which was a date after which major credit networks would start holding the merchants liable for any fraudulent transactions unless if the transaction was authorized with EMV. As a consumer, this appeared to me to force most shops and businesses to get machines that are capable of reading smart cards finally. At the same time, many seem to accidentally have also gotten machines that are capable of NFC/“tap to pay”. At some shops, the machine is willing to try to do the tap to pay workflow but will unconditionally fail (so you ask if it is OK to use it first if you are unfamiliar with the shop). But, where that does work, you can generally use Google Pay or Apple Pay! I use Google Pay where I can because I don’t want to pull out my physical wallet.
I love that even shops which say they don’t support “Apple Pay” (yes, Android users have to lie and claim to have an iPhone set up with Apple Pay to be allowed to try using Google Pay at some places) will often work with Google Pay. If their terminal displays the tap to pay icon, Google Pay (and presumably Apple Pay too) knows how to fall back to pretending to be a credit card rather than doing a “proper” Google Pay transaction. And that saves me from reaching for my physical wallet which keeps me happy.
I still have written checks at certain times. However, it is getting more and more rare. I can pay taxes with EFT (and they transfer our stimulus “checks” to us using the EFT info you put down), pay my dentist in the office using a POS supporting tap to pay instead of letting them bill me in the mail (which would have me pay by writing my credit card number down on paper and mailing it or writing a check, err, “cheque” (sorry, I’m American x.x) at which point I feel a check is more secure), and everything I do in person has proper POSes accepting at least credit cards if not accidentally supporting contactless pay, and everything else online supports at least credit if not PayPal.
I don’t like the idea of treating money like an RPG. I want to just quick pay and end the human interaction (if in real life), not think about which card to use, not spend time trying to find “deals”, not keep track of coupons, etc. It bothers me to see people flipping through a wallet full of different branded credit cards trying to find the right one as I wait in line behind them. People would tell me to get credit cards “to build credit” and for the rewards, but I needed neither of those things. So, for a long time, I survived with just my bank card which also acts as a debit card and sometimes sort of acts like a credit card. I don’t understand how it works, but back 10 years ago(?), when using my bank card at POSes (and, well, still today at some gas (petrol) station terminals), I will be asked by either the human or machine whether or not I want to pay by credit or debit. At a gas station terminals, choosing credit means you enter your ZIP code to authenticate rather than your debit/bank card PIN. (While it is still uncommon to find tap to pay at gas stations, my favorite grocery chain, Meijer, has gas station terminals which actually properly support PIN-free Google Pay, so I fill up my car there for just that reason x.x.)
So, at first, because I had the option to use my bank card as credit or debit, I thought my bank card was usable as a credit card. However, being debit versus credit just seems to affect how long it takes a transaction to post to my checking account—without actually making my bank card a “real” credit card. I still don’t know why.
However, I found out that having a bank card was actually insufficient. When renting a car during some work travel at a particular airport, I was asked to present a credit card. I handed over my bank card and said “I can run this at credit or debit at places, so it must be usable as a credit card”. But that was not acceptable. Thankfully, the car rental agency accepted a glance at an email showing my return flight itinerary as sufficient proof that I would return the car(?). After that, I decided to get a bank-issued credit card because I wanted to be able to rent cars without having a return flight itinerary. And, later, I researched a little and found out about how credit cards, unlike bank cards, offer car insurance for me for cars I rent. I assume they also provide some sort of dine-and-dash insurance against me for the car rental agency, but I do not know how that works. This is the primary reason I have two payment cards rather than just a bank card. (There is a secondary reason: my bank once reissued my bank card and after that it stopped working at a particular website but my credit card works, so I just now pay at particular locations using my credit card as a fallback in case my bank card doesn’t work).
For payments between people, I personally prefer PayPal. However, what you know about and what technology you actually use depends a lot who you interact with and how. For example, while I use Facebook Messenger to communicate with a lot of my friends, I have managed to avoid using its payment feature. However, Venmo is almost universally accepted. This is a situation that seems ironic to me: both PayPal and Venmo are operated by PayPal. However, there are some important differences. PayPal lets you transfer funds via its website whereas Venmo only allows you to transfer funds using a mobile app (their website used to support that but they intentionally removed that feature). PayPal lets you transfer funds to friends for free only if you give it direct access to a checking account (debit/bank card does not count) so it can do EFT whereas Venmo allows free transfers even when backed by a bank card (it does charge you the credit card processing fee if you use a credit card instead of a bank card). It is so weird that there is such feature disparity within two brands run by one company, reminds me of region locked DVDs but I can’t think of why.
I’m taking note of one thing for sure: I should make my US PayPal account connect to my bank so I can pay artists directly next time, then 😛
Funny thing with the contactless payments. I remember at a Walgreens in Pittsburgh just tapping my Revolut card on one of the Apple Pay terminals and the cashier going «I don’t think that’s going to work… oh nevermind it went through fine…»
Also yes, the whole thing of what can or cannot authorize payment with credit cards is always fun, see my older posts to see you’re definitely not alone 😀