UNDERCOVER UNBANKED: American Banker reporter Kevin Wack spent a day pretending to be unbanked in order to gain a better understanding of the challenges faced by people without access to traditional financial services. Wack observes firsthand the hefty costs associated with prepaid cards, money order purchases and check cashing. "Every transaction took longer than it seemed like it should, but still, our money quickly started to dissipate," Wack writes of the experience. "We were charged $6.15 to cash a $105 check, then another five bucks to send a $40 money transfer." Check cashing stores also seem to be lagging behind banks in automation, Wack writes. Whereas the Ace Cash Express store he visited lacked self-service kiosks, a nearby JPMorgan Chase (JPM) branch used them as customers' primary point of contact.

QUESTIONING CUSTOMER SERVICE: Community bankers frequently hold up customer service as their trump card over national competitors but Kevin B. Tynan argues that this is wishful thinking: big banks are improving the customer experience, and more people are shifting to digital transactions anyway. "Customers want convenience, instant gratification and products designed for their lifestyle," Tynan writes. "That’s what community banks need to deliver." Tynan's assertion sparked a lively discussion in the comments section. A commenter with the username stevem55 pointed out that community banks lack the resources to compete with big banks on technology. "Technology is not a differentiator once everyone has the same thing (which community banks are working at getting up to parity)," stevem55 writes. Christine Nelson, who contributed her own BankThink piece this week, argues that customer service can still make a difference if banks can identify the offerings that make them truly unique. "For one bank I know, it has been their ability to conduct underwriting quickly due to their connections with site inspectors for construction," Nelson writes. "Tell that story. Don't say, 'we provide good customer service.'"

Also on the blog: When Christine Nelson's bank sent her a form letter announcing that her home equity line of credit had been abruptly cut in half, she decided to take her business elsewhere. Banks that engage in these kinds of alienating practices ignore "the realities of an increasingly diverse and skeptical customer base," she writes, "not to mention the competitors that are always ready to swoop in on frustrated patrons."

Fancy design and sleek technology will only go so far in determining the success of a branch, according to Dave Martin. The quality of branch managers and their staff still makes or breaks market share.

Banks looking to remain at the forefront of small business lending should take a cue from PayPal, Square, Alibaba and other alternative lenders, according to Yodlee's Greg Weddell.

A lot of people agree that the debt collection system needs to be reformed. There is less consensus about how to do it. Bill Bartmann, a debt collection agency chief with a storied past, has a unique proposal that he says would benefit both banks and consumers. Give banks a one-time tax credit for charged-off consumer debt, Bartmann says. Then have the banks donate the debt to a new breed of nonprofits that would help indebted people get higher-paying jobs and deal with their other creditors before working out a repayment plan. While Bartmann says the solution is win-win, some readers remained skeptical. "I agree that the bank stockholders will benefit as will the consumer," wrote Gary Lewis Evans. "I don't know why all Americans (through the tax system) should pay the price for bad debt."

Banks' insurance policies may prove insufficient in the wake of a major cyberattack, warns David E. Wood of the law firm Anderson Kill. He suggests that banks protect themselves against cyber risk by strengthening their data security, improving risk management and self-insuring.

As more small-business borrowers turn to alternative lenders for credit, some worry about the possibility of a new subprime bubble. Economics professor Ronnie J. Phillips says that high-cost loans are a real concern—but that regulators should hold off on a crackdown for now, lest they stifle financial innovation. 

The Community Reinvestment Act, which is meant to help ensure that banks meet the credit needs of lower-income communities, does not mention race or ethnicity. But regulators have been using the law to enforce fair lending requirements. This practice could make the CRA less effective, according to BuckleySandler counsel Warren Traiger. "After all, if banks that meet CRA standards still risk having their ratings downgraded due to unrelated activities, the ratings lose their meaning and utility," Traiger writes.

Last call: It's almost time for BankThink's annual summer reading list for bankers. If you have a suggestion, please email the title of the book and a few sentences about why you're nominating it to sarah.todd@sourcemedia.com. The deadline for suggestions is today, June 6.