A few months ago I wrote a blog article comparing the travails of banks today to the challenges faced by the late and little-mourned Blockbuster Video chain.
I’ve had a chance to sleep on this piece and I’ve decided a better comparison might be around the US higher education business.
Some background: At an event nearly a decade ago for Harvard President (and future Treasury Secretary) Larry Summers, I asked what the University was doing to develop online relationships with its alumni.
His curt answer: we haven’t given it much thought.
I’m probably not the only one that Summers has tried to make feel like an idiot (did he do the same to my fellow Harvard alum and North House resident Sheryl Sandberg?). In any case, I’m thinking my question was more prescient than I (and certainly President Summers) could have imagined.
That’s because the emergence of the Massive Open Online Courses (or MOOC’s) has put a pitchfork into the gears of the US higher education industry. With uncertain ROI on their investment, and given real alternatives, students are less inclined to make a beeline for pricey, sun-dappled campuses. This is all the more true for older and other non-traditional students who have to pay their own tuition bills.
The education industry is steadily moving online, with brick-and-mortar colleges offering so many breaks that the full-fare option is like the rack rate at a swanky hotel. No one pays it! Converse College, a women’s college in North Carolina, recently acknowledged this by cutting tuition rates across the board. Why charge a fee that only a handful will pay?
Flash back a few years, though, and US universities were like an English lord suffering the effects of gout. Revenue had soared, fueled by cheap student loans, and endowments of a few elite colleges topped the wealth of some countries. Universities had a captive market in students and were hiring gobs of administrators to run their programs.
This bloat paralleled the situation with banks, who also had gorged on cheap credit (funded as well by the US government) and who held a monopoly on lending, deposit-taking, and the movement of money in general.
Today, more than 50 percent of bank transactions take place outside the branch. Increasingly, in the age of PayPal, Ping It and others, these transactions do not involve a bank at all. Accenture recently issued a study indicating that traditional banks could lose 35 percent of their business to payments firms and other digital competitors (bank and non-bank) by the year 2020. Some observers believe a 50 percent decline is as likely.
It just goes to show that when you have a stranglehold on an industry, the more you stick it to your customers, the quicker they’re likely to abandon you, once given a chance to do so.
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