Banking Models
The service fee banking model is the most appealing to me, and frankly, I believe it is a model that is long overdue, an opinion that I will explain further later in this communication. A quick review of Regulation CC, Availability of Funds and Collection of Checks, leads me to believe that financial institutions have more leeway in customer transactions than is appropriate. Moreover, I believe that Regulation CC, while perhaps appropriately structured, is poorly implemented. That is to say that Regulation CC is designed to protect financial institutions from unnecessary risk generated by individual banking customers. On a customer to customer basis, the risks management provisions of Regulation CC seem excessive; it is only when one considers the absolute numbers of transactions that could conceivably fall into the Regulation CC categories that an appreciation develops for the potential risk that Regulation CC has the capacity to protect against.
The primary requirements of Regulation CC are to: 1) Make customers' funds available for withdrawal within the times that are prescribed by the regulation; and, 2) provide funds availability disclosures to customers. The primary objectives of financial institutions appear to be: 1) Protect their operations against unnecessary risk, and 2) maintain a reliable and lucrative revenue stream to financial institutions. Given that the terms of Regulation CC are vulnerable to subjective interpretation by the financial institutions, there appears to be simply too much opportunity for slippage -- for banks to be more concerned about their profit margins and shareholders than about providing service to their customers.
I prefer the service fee banking structure, primarily because it can be provided with considerable transparency -- and the fee schedules can show precisely what a customer is buying and how much they are paying for the services. Indeed, the service fee structures can reflect the actual frequencies at which...
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