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Americanisation of British Retail Banks

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Innumerable websites provide plethora of resources which try to define Americanisation. The most common statement which articulates its meaning is ‘Americanisation is the influence American culture and business have on other countries, such as their media, cuisine, business practices, popular culture, technology, or political techniques.’ Since 1907, this term has been used to speak about the influence of American culture in the target country.

In 1920, American poet and Russian immigrant Elias Lieberman, attended a conference of English teachers promoting Americanization. There, He pronounced Americanization as the ‘process of teaching the foreign-born the idioms not only of our language but of our thought; of familiarizing them with American traditions and American ideals; and of encouraging action in harmony with such teaching.’ Throughout the 20th Century, Immigration was on rise on the American soil. Hence, Americanisation can also be viewed as a system of teaching the immigrants in the USA about America and convert them completely into Americans before giving them the citizenship rights. However, it is amusing to see how this national trend transcended and was diffused throughout the world and majorly in Europe. Various elements contributed to this diffusion. For example; Workforce, Industrial organisations etc.

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Harm G. Schröter, in his book ‘Americanization of the European Economy- A compact survey of American economic influence in Europe since the 1880s’ defined Americanization as ‘an adapted transfer of values, behaviours, institutions, technologies, patterns of organization, symbols and norms from the USA to the economic life of other states’. Hence the First wave of Americanisation in 1870-1945 introduced to the world and specially Europe, to Standardization and interchangeable parts’, ‘American big business and industrial concentration’, ‘Rationalization and scientific management’, ‘Motion pictures and Americanization’. Etc. The second wave in 1945-1975, the great post war boom reinforced Americanization through the American Marshall Plan. The third wave was witnessed in 1980s which surfaced the economic slowdown and the American model. It also brought about Change in patterns in financing enterprise: from bank credits to market capitalization, Redefinition of shareholders: from the rich to the masses, Risk-taking as an economic virtue and the concept of the consumer as individual. Hence it wouldn’t be wrong to say that every wave of Americanisation strengthened its hold over the world and notably the European businesses and firms.

European businesses in 1900s viewed Americanization as being similar to ‘innovation and progress’. In Germany, ‘Rationalization’- The American efficiency movement that sought to identify and eliminate waste in all areas of the economy and society, and to develop and implement best practices, was a powerful economic and social driving force as it meant efficiency and greater productivity which would eventually lead to prosperity. Thus, the European firms and business started adopting various models from America. One of such many businesses which was touched by Americanization was the British Retail bank in 1955-1970.

Mr. Alan Booth, in his case study on British Retail banks, in the book ‘Americanisation in 20th century Europe: business, culture, politics. Volume 2’, states “The retail banks play an especially important role in Americanisation, since they both mass produce financial services and have a vital role, via credit creation, in the mass consumption of manufactures.” The wave of Americanisation had hit the financial system in Europe. With technology and shift in attitudes of the new Americanised consumers in Europe, the wider financial sector is undergoing slow but a systematic cultural change by 1950s. It is imperative to note that even though the progress of general financial sector in Europe was slow, The British Banks before 1939 held strong positions in the market. Its clients were not majorly firms or enterprises but the middle-class who were expected to remain within the boundaries of financial prudence. To them, the access to overdraft facilities was difficult and expensive. The banks offered them steady yet secure employment, above-average earnings with good promotion and a tidy pension on retirement.

During the war years, British banks flourishes and the “Big five” initiated a series of strategic alliances viz. takeovers and mergers. The five banks were Westminster, National Provincial, Barclays, Lloyds and Midland what were eventually reined in by the government control. In the later years, recruitment of less wealthy customers and introduction of small saving schemes was their response to the to decline due to the general depression of the time.

By 1950, there was a huge increase in provincial branch offices and emergence of the high street bank. With reduction of some controls over strategic alliances, consolidation surfaced in 1960s in which the Big five became the Big Four along with the takeover of several regional banks such as Martins, District Bank, National Bank, Glyn Mills and William Deacons. Around that time, the government launched a new banking service, The National Girobank which was a British Public Sector financial institution run by the General Post. In 1976, the Banking Act increased the supervisory role of the Bank of England.

The British banks were at the forefront of applying computers to the service sector. And this was made possible with the introduction of computing, credit cards and many new other services which led to the expansion of banks. In the eyes of the US, German and Japanese banking groups, the British Banking appeared to be an Internationally-Oriented competition. Nevertheless, the British Banks looked to the USA for advanced and new business ideas.

To understand how the British banks were influenced by the American ways, it is imperative to comprehend how the banks were organised and structured in both continents.

In the United States of America, in 1929-32, the banking sector witnessed new restrictions on retail banks by restricting interest on time deposits, prohibiting interest on demand deposits, enforcing separation of investment banking from retail banking and imposing compulsory insurance and regulation through the Federal Deposit Insurance Corporation. After 1945, the US banks found themselves competing ineffectively with savings and loan associations and credit unions for savings and time deposits due to the interest rate ceiling on time deposits. The retail banks operated the heavily-used accounts but inflation along with economic growth increased the use and the cost to banks of processing demand deposit accounts. Thus, the share of total deposits held by retail banks declined. Even though Bank of America is a model for the industry internationally, restrictions on branching in other states proved inefficient. Ironically, the American successful model was fragmented and diverse.

In Britain, the system was characterised by concentration and oligopoly. The big Five retail banks secured dominant positions in the current account banking and the market for industrial finance. When on one hand, the UK financial system was lightly regulated with no branching ban, no interest rate caps etc, The Bank of England on the other hand was devising tools and methods to shape and control banking policy on purely pragmatic basis. This regulatory network was strengthened after 1950 when the government used lending as its main anti-inflammatory monetary policy. The cartels of the big five and intense regulation led to increasing inefficiency thereby lacking any competitive edge. The corporate clients shifted to other banks and the extension of branch networks brought fierce competition over quality.

This competition and the efforts to increase efficiency led to creation of new financial products and introduction of modern technology through computerization.

The presence of computer has been revolutionary in the post-war retail banking. In 1950, California’s Bank of America, in collaboration with the Stanford Research Institute started developing a large computer system for current account banking and by 1955, it introduced an IBM 702 into its San Francisco branch to manage mortgages and instalment loans. Later, the American Bankers’ Association (ABA) established committees to work with equipment suppliers to establish a common standard. By 1963, almost every bank has its own computer installation. Thus, USA saw computerisation as a tool of effectiveness, efficiency and modern way of managing tedious banking affairs.

In Britain, the progress was slow on computerisation as compared to their US counterparts. This was proving their long-run competitive position as unstable. The use of cheques was rampant and by envisaging an increase in the use of cheques, the British banks sought to find technology for automation. In 1956, the Committee of London Clearing Bankers (CLCB) had its own committee of computer experts. Even though they followed the American lead very closely, it took them more than 40 months to allow European manufacturers to perfect their own systems. Being impatient, Lloyds ordered an E-13B reader from Burroughs-An American company, in March 1960. Eventually CLCB had no choice but to adopt it. Barclays on the other side were also in discussion with US suppliers and placed its order for an IBM reader in December 1960.

Bookkeeping became a challenge with the installations of new computers in British banks. Despite the presence of data transmissions via telephone lines, most banks went bank to feeding data on paper tape. This tedious process did not last long as the banks quickly realised the potential for on-line, real time computing. Within 8 ½ years, Lloyds became the first British bank to have transferred its entire branch network to a common on-line computer accounting system. This was the one of the few indications of Americanisation of British banking processes. This was soon to be a major shift in the whole British banking network, Computerisation was faster in Britain than in the USA. Fascinatingly the shift to on-line, real-time computing was achieved through US hardware. From system to tools, the Banks were looking up to their US counterpart as a reference society.

This reference society brought to the British banks, not only computers, tools, and systems. But it also contributed to the development of new products in the British Retail banking sector.

The United States of America was moving from computerisation of core activities into new product development using spare hardware capacity and their in-house system analysts. These products were accounting operations, payroll management, the analysis of income and expenditure flows etc. There was full fledged commercialisation of these services as ‘Manufacturers National Bank’ established a whole separate division to manage this purpose. Other large US banks did the same.

On the other hand, British banks were not far behind. By exploiting their excess capacity on their computers after the automation of core tasks, Barclays created a new division of ‘Computer Services’ to utilise spare computing capacity. The computer revolution in Britain allowed healthy competition and brought about competitiveness and quality. By 1950, the British banks offered their customers new products.

The earlier cartels which hindered the progress of the market through various means were now getting competitive with the computers and its use by developing new products. This was another way by which the influence of America was seen in the British retail banking.

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