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Financial Services Industry

Ahead - new banking law; class action suit against Peapod; temporary workers unionize; speculation on election results; other issues

Kiplinger's Personal Finance Magazine, Jan, 2000

BANKING | The new law will mean NEW FACES and new services at your bank. But that won't make your financial decisions any easier.

COMING TO BANKS NEAR YOU

BANKING | The new law will mean NEW FACES and new services at your bank. But that won't make your financial decisions any easier.

After two decades of wrangling among bank regulators, Depression-era barriers separating banks, brokers and insurance companies have come crashing down. But the effects will be less than earthshaking. While banks will try to persuade you to trade stocks and buy insurance policies at the same place you have your checking account, the advantages of one-stop shopping are overrated.

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Consumers don't necessarily want to buy all their financial services in one place, says Robert Mayer, a professor of family and consumer studies at the University of Utah. They're more concerned about not having to make complex financial decisions, and "one-stop shopping doesn't make those decisions any easier," says Mayer.

Megabanks won't be a threat. Another round of mergers--particularly banks acquiring insurance companies--is imminent, but consumers will have as many choices as ever. "Because of the Internet and because you don't need to be 12 yards from your bank anymore, you can choose a bank almost anywhere," says University of Delaware economist Eleanor Craig. And the number of bank start-ups is at its highest level since the `80s--especially in the Southeast and other areas where mergers have shut down branches.

Look for lower prices and better services. "In general, deregulation is good for consumers," says Michael Walden, a consumer economist at North Carolina State University. But the pocketbook effects will be much smaller than when the airlines and the telecommunications industry were deregulated. While prices, on average, will go down, says Walden, some services that used to be free may now carry a fee. That's because firms will have the freedom to charge what the market will bear.

The privacy Issue won't go away. You won't be able to stop a firm such as Citigroup from sharing information about customers with its Citibank, Travelers and Salomon Smith Barney subsidiaries. But by law, firms will at least have to disclose their policies on sharing personal financial information within affiliated companies and with third parties. And consumers will be able to say "no" to data-sharing with outside third parties.

Letting banks use this valuable information within their organization could be a good thing, says Lawrence J. White, a professor of economics at New York University's Stern School of Business. That's because they'd be less inclined to sell it to a third party, which would give consumers less control over it. "I think firms will tread lightly on sharing information with each other because consumers are becoming more sensitive about it," says Mayer.

TEMPEST IN A PEAPOD

Online grocery customers who had hoped to save themselves a trip to the supermarket say they got taken for a ride. In a class-action suit, customers say that for at least six months during 1999 Peapod charged prices that were as much as 20% to 30% higher than those listed on its Web site.

The suit involves customers in the Boston area, where Peapod initially filled orders by sending employees to a local supermarket, Stop & Shop. Then, last February, Peapod began supplying some nonperishable items from its own warehouse-at higher prices.

Meanwhile, says the plaintiffs' attorney, Thomas Evans, Peapod continued to let customers believe that they were getting Stop & Shop prices as well as free delivery.

Peapod responds that it didn't add anything to Stop & Shop's prices and that the prices on its Web site were only estimates. "Grocery prices change frequently," says Sue McQuay, Peapod's legal counsel. --CATHERINE SISKOS

TAPPED OUT?

Credit card companies are sending out a record number of solicitations-3.5 billion pieces of mail a year. But the response rate last spring was the lowest quarterly rate in the past ten years of tracking, according to BAIGlobal, a market-research firm.

Does that mean less junk in your mailbox? Nope. Direct mail is "still one of

the more effective ways to reach people," says Julia Beaver of BAIGlobal.

THE SCOOP ON POOPS

Not only do we have to figure out what to call the new decade ahead, but we also have to coin a few phrases to define the people who will populate it. In his new book,

Zachronyms: Funny Words for Funny Times (Innovative Futures, $8.95), futurist David Zach offers some delightfully pithy suggestions:

SITCOMS: Single income, two children, outrageous mortgage

PINKIES: Parents in nursing home, kids in school

POOPS: Pet owners outnumbered by their pets

YUMMIES: Young upwardly mobile mommies

SKIPPIES: School kids with income and purchasing power

OGGIES: On-the-go grandparents

BEEPERS: Busy execs pretending electronics reveal superiority

WORKPLACE | Temps strike out on their own in a HIGH-TECH LABOR UNION that trades in information. By Kathy Jones

Financial Services Industry

Ahead - new banking law; class action suit against Peapod; temporary workers unionize; speculation on election results; other issues

Kiplinger's Personal Finance Magazine, Jan, 2000

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