Welcome to consulting. Your analysis is, sadly, compelling in showing the OW analysis is not-as-compelling as the headline. And i would argue, even if the cost to clients is valid and true, the banks who now collect the fees won't simply stop charging for moving money.
I am glad somebody picked that up and it is very insightful, if the 100 bn are such a concern, the easiest way to resolve in fact overnight would be to set all transaction fees to zero and instead increase the spread in FX rates for instance. Since we have competition (the benefit of competition sometimes is available even with no competitors eg concepts like contestability). The are many constraints incl. lovely topics like inducements so banks don’t have unilateral privilege to set prices as they wish. Changing cost of ownership is hard, changing the cost allocation within it: that’s relatively easy. And tinkering with one aspect sometimes may have unexpected consequences esp if the cost levels overall has not come down after the change in question was delivered. and nothing is forever. maybe the new tech then creates a possibility nobody has thought of. could happen. but no bank can plug such a number in a business plan .
(Hope you are well). The real "cost" underlying these numbers is the real world the delays in moving funds, due to different hours, need for systems to update "overnight", correspondent banks talking to majors, etc. Float - remember balance sheet float? - is vastly in the banking systems favor. I do not recall if the analysis included the bank benefit of float, versus the cost to clients (which is largely invisible to them). And for sure, SOMEONE has to do the FX, which is not in the analysis at all.
Thank you, I should also make clear that I have a strong selection bias to favour reading OW reports because of the topics covered and how it is approached. And therefore, I have rarely said much about other consultants, because I don’t read it.
Welcome to consulting. Your analysis is, sadly, compelling in showing the OW analysis is not-as-compelling as the headline. And i would argue, even if the cost to clients is valid and true, the banks who now collect the fees won't simply stop charging for moving money.
I am glad somebody picked that up and it is very insightful, if the 100 bn are such a concern, the easiest way to resolve in fact overnight would be to set all transaction fees to zero and instead increase the spread in FX rates for instance. Since we have competition (the benefit of competition sometimes is available even with no competitors eg concepts like contestability). The are many constraints incl. lovely topics like inducements so banks don’t have unilateral privilege to set prices as they wish. Changing cost of ownership is hard, changing the cost allocation within it: that’s relatively easy. And tinkering with one aspect sometimes may have unexpected consequences esp if the cost levels overall has not come down after the change in question was delivered. and nothing is forever. maybe the new tech then creates a possibility nobody has thought of. could happen. but no bank can plug such a number in a business plan .
(Hope you are well). The real "cost" underlying these numbers is the real world the delays in moving funds, due to different hours, need for systems to update "overnight", correspondent banks talking to majors, etc. Float - remember balance sheet float? - is vastly in the banking systems favor. I do not recall if the analysis included the bank benefit of float, versus the cost to clients (which is largely invisible to them). And for sure, SOMEONE has to do the FX, which is not in the analysis at all.
Thank you, I should also make clear that I have a strong selection bias to favour reading OW reports because of the topics covered and how it is approached. And therefore, I have rarely said much about other consultants, because I don’t read it.