Americans are infatuated with technology. E-mail and texting has made communication faster and more efficient, even if some of our kids fail to reply to the text, “Where are you, and when are you coming home?” Technology has made shopping easier; buying tickets to the opera, sporting events, and theme parks effortless; and even most recently put the Kardashians’ clothing store out of business. The Yelp app can help find the perfect restaurant, and the flashlight app is great to read the menu in that poorly-lit but otherwise perfect restaurant.
Technology has changed the perception of commerce. It appears much faster to order clothes than drive to the mall, get a coffee, take a detour to the sports store (OK, I would do that, but not most people), find the clothing store, try on the clothes, pay, and drive home. With online shopping, it’s scan, click, and pay. That may sound more cost-effective, but is it really? Are online purchases less expensive than the old fashioned way? Now that clothing and the Kardashians have been technologically disrupted, banking is next. The apps include slick advertising with promises of total financial freedom.
Anyone who watches TV or their smartphone has seen ads for SoFi, which positions itself in the marketplace as the leader in student loan refinances, but their website says they are “a new kind of finance company taking a radical approach to lending and wealth management.” In other words, it’s not just about student loans. They want an individual’s entire financial relationship – mortgages, personal loans, investments, and even life insurance. Their management team is not comprised of junior Mark Zuckerbergs inventing a cool new app in their college dorm rooms. They are long-time mega banking veterans who take no prisoners, which means it is all about their bottom line and not about saving money for consumers. SoFi also is not required to follow all the consumer protection laws your Credit Union must abide by.
Rocket Mortgage, a division of Quicken Loans which is owned by Intuit which also owns Quicken, QuickBooks and TurboTax, touts “super hero levels of confidence” with their mortgage products in their very slick commercials. This year, Rocket became the largest mortgage lender in the U.S., surpassing Wells Fargo. Generally, when homeowners and prospective homeowners are shopping for loans, they will first ask for rates. With Rocket, the rates are not disclosed until after the application has been completed. Most borrowers probably would not bother looking around so as to not have to spend more time on paperwork. The facts are that the process is not faster, the rates are not better, and the costs are not less. The benefits are, at best, minimal.
Perceived speed does not always equal better.
When Bud Fox’s father Carl (played brilliantly by Martin Sheen) confronted the infamous corporate raider Gordon Gekko in the 1987 classic movie Wall Street, Mr. Fox disputed Gekko’s argument that selling Bluestar Airlines, where Fox worked, to Gekko was good for the employees. “There came into Egypt a Pharaoh who did not know…The rich have been doing it to the poor since the beginning of time. The only difference between the Pyramids and the Empire State Building is the Egyptians didn’t allow unions. I know what this guy is all about, greed. He don’t give a damn about Bluestar or the unions. He’s in and out for the buck, and he don’t take prisoners.” Meet the new economy, same as the old economy; we don’t get fooled again (apologies to The Who).
David M. Green