Retail Banking Oligopoly

During the brouhaha over the $5-a-month debit card usage fee, this article came to my attention:  Banking Has Become an Oligopoly Instead of a Competitive Business. It said banking is now an oligopoly, and therefore switching banks will not work because banks are not in a competitive market.

“Banking is not really a competitive industry. In reality, it’s more like an oligopoly — a scenario in which an industry is controlled by a small number of firms.”

Somehow that’s not the impression I got. I feel like I’m being surrounded by many different banks competing with each other.

I searched for banks near me using Yahoo! Local. I sorted the results by distance to my address. I found 22 banks and 8 credit unions with at least one branch within 5 miles from my address. These are 30 unique banks and credit unions, not just 30 branches. They all have a physical presence near me. I’m not counting banks or credit unions I can access online.

If I limit myself to banks with a physical branch near me, I have 30 choices. Are they enough to form a competitive market? I think so.

Actually many markets I normally think of as competitive have fewer competitors than retail banking. I next searched for grocery stores. Within the same 5-mile radius, I found 12 names. There are more than twice as many banks near me as grocery stores.

No, retail banking isn’t an oligopoly. Broadband Internet access is an oligopoly. You’ve got the telephone company and your cable company. That’s pretty much it. Wireless phone service industry is an oligopoly: Verizon, AT&T, T-Mobile, and Sprint control practically the entire US market. Airlines are an oligopoly. Between any two cities, there are only a handful of airlines flying.

Maybe banking is competitive where I live but not elsewhere? Do a search and see if you more banks or more grocery stores near you.

Competition works. Competition forced Bank of America to abandon its plan for the new fee.

AlterNet, where the referenced article was published, is an interesting place. Although I never heard of it before, it looks like it has a large fan base.

Refinance Your Mortgage

Mortgage rates hit new lows. I saw rates as low as 3.25% for 30-year fixed, 2.625% for 15-year fixed, with no points and low closing cost. Let banks compete for your loan. Get up to 5 offers at

FREE E-mail Newsletter

Join over 3,000 readers and get new articles by e-mail:

No spam. Unsubscribe any time.


  1. [email protected] says

    Bank of America backed down because so many people were moving their accounts. Most banks are looking for ways to add fees wherever they can. Choosing a credit union is a great alternative. They don’t charge fees to use a debit card, but also most still have free checking. That’s hard to find at a bank these days.

  2. Pelon says

    It depends on the definition of “banking”. Retail banking is very competitive with multiple banks and credit unions in almost every town. Investment banking and financial transaction processing are much less competitive.

  3. Harry Sit says

    @Pelon – The article I linked to was talking about retail banking. Here are the opening paragraphs:

    “Some folks have responded to Bank of America’s announcement of a new $5 per month fee on debit cards with a glib, “If you don’t like it, just pick another bank. It’s a free market, baby!” They say that competition will punish BofA for its evil ways.”

    “Sounds easy enough. Except for one small problem.”

    “Banking is not really a competitive industry. In reality, it’s more like an oligopoly — a scenario in which an industry is controlled by a small number of firms.”

  4. Shaun @ Smart Family Finance says

    That’s the kind of silliness you’ll read when reading someone with a political agenda. I’ve never seen anyone complaining about the Coke/Pepsi oligopoly over soda. But unarguably, retail banking is far, far away from an oligopoly.

Leave a Reply

Your email address will not be published. Required fields are marked *