Have you ever caught your bank making a mistake? Maybe they levied a fee in error, or maybe they penalized you twice for the same overdraft, or so on. I had this happen once–my account was “automatically” switched from a student no-fee no-minimum account, and so I immediately started racking up penalties for failing to meet the minimum account requirements. When I complained, I was treated nicely, the mistake was fixed, and I got various perks.
Now, have you ever not caught your bank when they made a mistake? We all have limited time and limited attention so it would be easy to miss small occasional mistakes.
This could be due to malice. After all, there must be a profit-maximizing point when you think about balancing the cost of dealing with complaints compared to the benefits of collecting unearned fees. Banks could be setting out to look for this point or simply stumbling upon it by accident–since supervisors get mad when the level of mistakes is sub-optimal from a profiteering perspective.
But either way, the bank is earning money because it is cheaper for them to catch mistakes than it is for you. They can have one full-time person looking for mistakes in hundreds or thousands of similar accounts; in other words, large institutions have economies of scale of attention.
Two possible solutions to this:
- Regulation: penalties for bank errors could be set much higher by statute, so that the equilibrium number of mistakes is set to maximize overall welfare and not just the bank’s profit.
- Automation: It’s plausible that the cost to consumers of finding mistakes will drop dramatically using services like If This Then That.
What are some other examples of large institutions bullying you around through mere attention?
(Inspired by a conversation with @JoshHenryKatz)