Mad at the banks and oil companies? Uberize them.
Uber is the mobile phone ride-sharing app that connects riders with drivers willing to take them to their destination. You can book an Uber ride on your phone and get an estimate of the cost of trip. If you don't like the service from traditional taxi companies, Uber offers an option.
Uber came to mind in reading about how declining crude oil prices this summer have not been reflected in the cost of gasoline. Our weak dollar is a factor here – oil is priced in U.S. dollars and a declining loonie makes gas more expensive for Canadians. But the refining side of the oil business is also part of the story – they're running flat out because of strong demand for gasoline and they're making huge profits.
The banks have similarly been pocketing savings that consumers could reasonably expect. The Bank of Canada has cut its benchmark lending rate by a total 0.5 percentage points this year, but banks have reduced their own prime lending rates by just 0.3 points. The prime is used to price home-equity lines of credit and variable-rate mortgages, which means it's relevant to lots of borrowers.
Banks and oil companies are under tremendous pressure from shareholders to keep profits strong and propel stock prices ever higher. Sometimes, customers have to be muscled to make it happen. That's business.
But so is Uber, which is currently in conflict with taxi companies and drivers in several cities across Canada. The taxi industry feels it's under attack by Uber, which isn't bound by the same rules and costs. That's disruptive pro-consumer technology for you. It comes out of nowhere, dekes right around traditional businesses and writes its own rules. Governments and regulators may catch up to them eventually, but insurgents such as Uber are hard to control because they're so nimble.
Banking and oil are just the opposite, and that makes them vulnerable. In fact, there are already a few alternative lenders challenging the banks. One is Mogo, the country's first online lender to go public. Another is Borrowell, an online lender offering competitive and transparent rates on loans. A tech startup called Financeit is helping people in the renovation business provide financing directly to customers. Bypassed in this process are the banks that depend on lending to generate a large part of their revenues.
Banks also make a lot of money providing investment advice, but they're vulnerable here as well. A new kind of online adviser – often called a robo-adviser – is reaching out to people who don't like the high fees and lack of transparency of the traditional financial advice business.
The oil industry is more insulated from any sort of disruption, including hybrid and alternative-fuel vehicles. In fact, sales of hybrids (they run partly on battery power) have been falling alongside oil prices. DesRosiers Automotive Consultants projects sales of 15,000 to 20,000 this year, down from almost 25,000 in 2012. Meanwhile, overall car sales appear headed to yet another record year in Canada.
Just wait until oil prices rise again, though. People will be more interested in the alternatives to filling up a car with gasoline, including buying a hybrid and swapping car ownership for occasionally using a car-sharing service. Even rental companies are getting into the car-sharing business these days by offering vehicle rentals by the hour.
Some people rationalize their exploitation by banks and oil companies in saying they're happy with the flow of dividends they get from owning financial and energy stocks. Oil companies have been cutting dividends lately, and their shares this week hit 11-year lows. Banks stocks offer substantial dividend yields averaging more than 4 per cent right now, but that's not necessarily a good thing. In a recent analysis, PWL Capital research director Raymond Kerzerho argued that stocks with high dividends do not necessarily provide higher returns. They simply provide more of their returns through dividends than capital appreciation.
Earlier this month, there was an animated discussion about oil companies and banks on my Facebook personal finance page. People are peeved about gas prices and bank interest rates.
Don't get mad about callous corporations, get busy. Find an Uber-type alternative and give it a try. Better still, invent your own and send me an e-mail to tell your story.
The Disruptors
Six services that take power away from conventional corporations and give it back to customers:
1) Uber: Bypass a city's taxis by lining up a ride with an Uber driver through your mobile phone; rates can be less than a taxi's.
2) Airbnb: Rent someone's home or apartment in a city you're visiting for less than typical hotel-room rates.
3) Netflix: You need an Internet connection to use this online TV-and-movie service, but you don't need cable TV.
4) Mogo and Borrowell: An alternative to the banks for people who need a loan.
5) IntelliMortgage: Do-it-yourself mortgage brokerage service.
6) Robo-advisers: Inexpensive online investment advice.
Rob Carrick