Earlier this week, the New York Times described how “an army of Internet activists” persuaded the FCC to turn a prior decision upside down and regulate internet-service providers like public utilities. Henceforth – or at least for as long as the courts and Congress let this stand – Internet access is a “public good.” Could the biggest banks be brought as low as the behemoth broadband providers? This seems far-fetched, but then so did the new net-neutrality policy just a few months ago.
The seeds of big-bank destruction could be strewn as effectively as those for the big ISPs if the same forcefield of politically-savvy competitors were to engage public opinion with the skills that brought millions of people passionately to the side of an open net. Mobilizing actions ranging from embroidering pillows on net neutrality to deluging the FCC with calls, this unprecedented advocacy campaign led the White House to concur and prevented Senate Republicans from advancing the bill drafted just a month or two ago to block any such decision by the FCC.
Social activism has had significant sway in the past over the biggest banks, and that was a decade or so before social-media turned complainers into formidable political coalitions. In the mid-1990s, a few banks – all of them very big – decided to enhance the value of their branch networks by slapping a surcharge when customers took out cash from accounts held at other institutions through the bank’s own ATMs. Use to a system in which banks charged what they liked because customers had nowhere else to go, banks just assumed customers would pay up and go back about their own business.
Customers were not, though, quite so quiescent. Because this was done without warning and no fanfare, customers accustomed to stopping at any ATM to get cash suddenly found their accounts docked for dozens of small-dollar ATM-transaction fees. They were, to put it mildly, irked.
From that, Congress revved up – Members and staff were no happier than ordinary customers at a charge many viewed as deceptive in the absence of advance notice and clear disclosure. Why do all ATMs now have a prominent sign about surcharges? This was the compromise crafted after banks fought back a withering barrage aiming to ban fees all together.
Fast forward to 2015. Customers don’t like banks any better than they did in 1996. In fact, they like big banks a whole lot less since the financial crisis, and the industry’s public profile has slumped to the nether regions. Just this week, a prominent EU official – once himself a bank lobbyist – proclaimed big banks to be “pariahs.”
Survey data show that consumers don’t much like their ISPs, but they flat-out loathe big banks. What would it take to round up a posse of comparable size and ferocity to the one that tarred and feathered the ISPs? Put it this way: Millions of people just spent time arguing about whether a dress is blue and black or white and gold. Millions more agreed that Joe Biden needs to be a little less public with his displays of affection. Clearly, anything can energize the American public. Add anger to interest, give it some media momentum, and bar the door.
Of course, it wasn’t just the embroidered pillows and tweets that caused the FCC turn-around. It was also the aforesaid start-up content providers who feared competitive damage at the hands of ISPs empowered by authority to be anything but neutral in how they priced or timed third-party providers.
Big banks face a similarly significant competitive threat, one revved up by labor unions and lots of others who don’t like big banks much. Community banks are of course high up on the list of folks wishing big banks ill, but still more formidable social-media folks also want a large part of the big-bank action. It might not be Amazon’s or Apple’s style to take big banks on over the net, but a lot of P2P players aren’t anywhere near so picky.
One might think an aversion to government intervention in the market would soften, if not stop, any blows aimed at the biggest banks. It hasn’t, though, helped the ISPs. Republicans in the Senate have decided they aren’t ready to side so clearly with big boys when so many constituents want something else and so many Democrats are ready to align Republicans with the forces of Internet evil-doing. It would need to be a misdeed of major proportions to take on-line activism from a consumer-complaint fest into a far-reaching strategic challenge that forced big banks out of a key business line or otherwise redefined their charters. But, could it happen? Ask Comcast.