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 LendingTree.com.