Are we are all criminally inclined sheep that need to fleeced and controlled?
Notorious unpaid blogger Michael Arrington recently described his battle with a bank over direct debit charges.
To overcome a fraudulent recurring charge on his credit card, Arrington cancelled his account only to find the bank moved the recurring charges to the new card, a ‘service’ designed to avoid fraud and save customers the hassle of re-establishing legitimate direct debits after a new card is issued.
Both of those are noble reasons but the core of this philosophy lies in a contempt for customers which can be summarised in two principles.
A customer is;
- A sheep to shorn of any available cash through sneaky fees and shady business practices
- A criminal
In the 1980s business school view of the world, customers are criminally inclined sheep who have to be regularly shorn to enhance profits and controlled so they don’t go anywhere else.
Only businesses operating in protected environments can get away with this today and the two obvious sectors are banking and telecommunications.
The telco industry long soiled its nest with consumers with dodgy charges and a contempt for customers which reached a peak (nadir?) with the ring tone scams where kids had their phone credits pillaged by fees they never knew they had signed up for.
While those dodgy charges paid the handsome bonuses of telco executives, it proved to another generation of consumers that these companies see their customers as sheep to fleeced on a regular basis.
Ironically it’s that lack of trust that dooms the telcos in the battle to control the online payment markets – their practices of the 1980s, 90s and early 2000s mean few merchants or consumers will trust them as payment gateways.
One of the strengths banks bring to that market is trust. Like cheques, credit cards succeeded as a payment mechanism because people could trust them.
In screwing customers over direct debit authorisations, the banks are damaging that trust as Arrington says “I really don’t think I’m going to be giving out my credit card so freely in the future.”
That’s a problem for businesses as direct debiting customers have been a good way to ensure cash flow and reduce bad debts but when clients perceive there is a high risk of being ripped off they will stop using them.
Businesses that insist on direct debits will be perceived as potentially dodgy operators who rely on locking customers into unfair contracts rather than providing a decent service for a fair price.
So the banks’ position of legal power works in their short term interest and against them – and the merchants using their services – in the longer term.
While bank and telco executives with safe, government guaranteed market positions will continue to treat customers like criminal sheep it’s something the rest of us can’t get away with.
The winners in the new economy are those who deserve to be trusted by their customers and users, if you’re abusing your market and legal powers then you better hope politicians and judges can protect your management bonuses.
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