For the past few centuries, banking has made looking after money incredibly convenient, no matter what country each banking institution is in. Two countries which have world-renowned banking sectors are the United Kingdom and the United States. Both are, on the whole, successful, but they both have significant differences in terms of customer service, products and organisation.
In the UK, the Bank of England has been responsible for determining interest rates and overseeing inflation since its foundation in 1694. Initially after gaining independence, the US had decided to move away from the British model, but decided to create the Federal Reserve in 1913 as the nation’s economy grew. There seems to be little to separate the two.
The influence of both the BoE and Federal Reserve on the commercial banking sector is pretty big. Many banks’ interest rates are similar to those set by each nation’s central banks, although in terms of the actual products and way in which a typical bank from either country works, the differences are more marked.
What’s in a name?
Banks either side of the Atlantic offer current accounts (the name used in the UK), but in the US, they’re known as ‘checking accounts’. Both are pretty much the same, as they’re used for wage payments and everyday spending, while savings accounts and mortgages work pretty similarly in either country.
In terms of technology, the US banking system has embraced so-called ‘contactless’ transactions far more quickly than their UK counterparts. Debit cards, credit cards and other forms of contactless payment via the internet or phone are more common Stateside.
Meanwhile, American account holders are used to paying for each transaction at an ATM machine, whereas withdrawals at most UK ATMs are free of charge. This suggests that in some respects, UK banks are a little more receptive to their customers’ needs by offering more free services.
Building societies, which are found mainly in the UK, offer similar products to banks, but have one major difference – they’re run by members (anyone who holds a mortgage or savings account with them). They tend to offer some products for less such as mortgages because they don’t pay dividends to shareholders like some banks do.
According to a study by Yorkshire Building society, 34% of people have some distrust of the financial sector, partly because of the spate of big bailouts of some chains. This could help to make building societies seem like a viable alternative to banks propped up with taxpayers’ money.