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Differences Between US and European (Continental) Retail Banking
By retail banking I mean banking services oriented towards people and I emphasize continental because I am familiar with it although UK system may be similar.
Taken from here: http://www-math.uni-paderborn.de/~axel/us-d.html
Nobody writes checks here any more. Is the US system really that archaic?
Even if not it seems to me that retail banking in Europe is much more comprehensive (all-in-one service) than in the US. I'll add some thoughts to the above quote, feel free to correct me if I am wrong.
- there are no separate entities known as "mortgage brokers" here, banks do their own real estate handling, which means they take your application, check your creditworthiness, send a person to estimate the value of the property, approve the loan and then see it through to maturity
- there is no personal bankrupcy here and when you take up a loan, you commonly guarantee it with everything you have, forever. For example, you can't "walk away from a house" if the prices drop, since the bank will not only take the house, but also sit on all your accounts and take any money that appears there until they get their money back
- banks are completely networked and we have a compulsory ID system, this means that you can't disappear for a period and then open a new account with a different name in another bank
- credit history is maintained by a single inter-bank joint company, not many companies like in the US
- internet banking is always used with mandatory cryptographic "tokens" which renders it both safe and tedious
- banks do payment clearing electronically a couple of times a day, you can pay something to someone's account in another bank over the internet and it will appear on their account balance in a couple of hours
- there is no such thing as specialization here, all banks do everything. The same bank in which I have my checking account to which my salary is paid by my employer also issues credit cards, has its own stock exchange brokerage, has its own various investment funds, pension funds, savings programmes, sells insurance, works with both companies and individuals (and governments), gives loans for everything from mining equipment to PCs or education, underwrites bond and stock issues, serves as money exchanger... they do basically everything related to money. It's scary.
Taken from here: http://www-math.uni-paderborn.de/~axel/us-d.html
The [US]banking system is archaic. It appears as if banks are not electronically connected at all (even though they are). It is not possible to instruct your bank to pay your rent every month directly into the landlord's account (the usual method in Germany). Every month, you have to write out a check, send it physically to your landlord, who carries it physically to his bank, which sends it physically back to your bank in order to get the money. Banks tell you to keep your account number secret, but it is openly printed on every check, along with your name and address. Some banks now offer "bill paying services"; this only means that *they* will mail the check to your landlord instead. Another new system, heralded as a huge achievement, is "Direct Deposit" or "Automatic Payment". It allows to make regular payments such as salary, insurance or utility payments directly without checks. It does not work between private accounts and it takes about 2 months to set up. (In Germany, it takes no time to set up a plan like that; you instruct your bank and then it works.)
Many US banks now offer "Internet banking" and claim to be on the technological forefront. All you can do with these services is move money from your checking account into a savings or investment account, check your balance and find out which checks have cleared. Almost all these site use a completely insecure static user/password login scheme; virtually all internet banks in Europe use one-time passwords or cryptographic challenge-response systems.
Merchants in the US accept checks, which of course can be trivially abused; German merchants only accept secured checks.
You will actually see Americans write out checks at super market checkout counters, and many people set aside an afternoon every month for "balancing their checkbook" and "paying the bills", two activities that nobody has even heard of in Germany.
In Germany, checks are not used to pay bills. You simply instruct your bank to transfer the money into the payee's account on a regular basis, or give permission to the payee to suck the money out of your account.
Many US banks now offer "Internet banking" and claim to be on the technological forefront. All you can do with these services is move money from your checking account into a savings or investment account, check your balance and find out which checks have cleared. Almost all these site use a completely insecure static user/password login scheme; virtually all internet banks in Europe use one-time passwords or cryptographic challenge-response systems.
Merchants in the US accept checks, which of course can be trivially abused; German merchants only accept secured checks.
You will actually see Americans write out checks at super market checkout counters, and many people set aside an afternoon every month for "balancing their checkbook" and "paying the bills", two activities that nobody has even heard of in Germany.
In Germany, checks are not used to pay bills. You simply instruct your bank to transfer the money into the payee's account on a regular basis, or give permission to the payee to suck the money out of your account.
Nobody writes checks here any more. Is the US system really that archaic?
Even if not it seems to me that retail banking in Europe is much more comprehensive (all-in-one service) than in the US. I'll add some thoughts to the above quote, feel free to correct me if I am wrong.
- there are no separate entities known as "mortgage brokers" here, banks do their own real estate handling, which means they take your application, check your creditworthiness, send a person to estimate the value of the property, approve the loan and then see it through to maturity
- there is no personal bankrupcy here and when you take up a loan, you commonly guarantee it with everything you have, forever. For example, you can't "walk away from a house" if the prices drop, since the bank will not only take the house, but also sit on all your accounts and take any money that appears there until they get their money back
- banks are completely networked and we have a compulsory ID system, this means that you can't disappear for a period and then open a new account with a different name in another bank
- credit history is maintained by a single inter-bank joint company, not many companies like in the US
- internet banking is always used with mandatory cryptographic "tokens" which renders it both safe and tedious
- banks do payment clearing electronically a couple of times a day, you can pay something to someone's account in another bank over the internet and it will appear on their account balance in a couple of hours
- there is no such thing as specialization here, all banks do everything. The same bank in which I have my checking account to which my salary is paid by my employer also issues credit cards, has its own stock exchange brokerage, has its own various investment funds, pension funds, savings programmes, sells insurance, works with both companies and individuals (and governments), gives loans for everything from mining equipment to PCs or education, underwrites bond and stock issues, serves as money exchanger... they do basically everything related to money. It's scary.
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