The Bankwatch

Tracking the consumer evolution of financial services

The Dangers of Thin Value

Umaiar defines thin value as a mirage that will eventually evaporate. it is value that has no point nor reason, other than generate revenue for the corporation. The landmark example he offers is ARPU, or Average Rrevenue per Customer in the telco business. The 15 second instructional wait time in front of every voice mail is worth $620 million to one telco is one example he offers. The sole purpose of the 15 seconds is to generate revenue, notwithstanding claims that it is for the benefit of the user.

The Value Every Business Needs to Create Now
| Harvard: Umair Haque Edge Economy

Profit through economic harm to others results in what I’ve termed “thin value.” Thin value is an economic illusion: profit that is economically meaningless, because it leaves others worse off, or, at best, no one better off. When you have to spend an extra 30 seconds for no reason, mobile operators win — but you lose time, money, and productivity. Mobile networks’ marginal profits are simply counterbalanced by your marginal losses. That marginal profit doesn’t reflect, often, the creation of authentic, meaningful value.

He goes on to refer to other examples of thin value, and its the last that interests me here.

Thin value is what the zombieconomy creates. The healthcare industry profits, but Americans get poor healthcare. Automakers fought tooth and nail against making sustainably powered cars. Manufacturers of all stripes stay mum about environmental costs. Clothing companies can’t break up with sweatshop labour. The clearest example of thin value, is, of course, banks: they invested our national wealth in assets that turned out to be literally worthless.

That got me to thinking what examples of thin value in retail banking are – value that has no direct correlation to benefit received.

  • no interest on the first $ xx
  • chequing accounts vs savings accounts
  • credit card interest
  • credit card terms
  • overdraft fees

The list can go on. The theme I see in the thin value concept is this: there is no direct attributable consumer benefit associated with the cost paid out. Everyone accepts there is a value expected for their financial services, and the thin/ thick value approach focusses on the relationship between the cost and the benefit.

Thin value suggests that the operator cannot rationalise the value they are creating, therefore must use back door methods to bring in revenue in other ways.

Relevance to Bankwatch:

Here is Umair speaking on the concept some more. The concept is scary for corporations, because it means that business is not going back to the way it was before. It is all to easy to assume that the crisis is easing and recovery means going back to business as usual.

But this is not going to be business as usual, as i have talked about previously here [consumer mindsets] and here [Enter the Zombie Banks]. Consumers are more self aware than ever, and more aware of switching opportunities through bank and non bank designed tools to perform self assessments online. Services such as Wesabe exemplify.

How will your bank redesign services to demonstrate thick value?

Written by Colin Henderson

August 1, 2009 at 09:26

4 Responses

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  1. Interchange fees are probably the best example of ‘thin value’ in retail financial services today.


    August 14, 2009 at 06:23

  2. Here’s the latest government action against interchange fees, this time in New Zealand:

    The Reserve Bank of Australia also imposed a standard rate for interchange fees in July 2003 ( and has maintained downward pressure ever since. In December 2007, the European Commission ruled as anti-competitive interchange fees on cross-border MasterCard and Maestro branded debit and consumer credit cards ( The EC later accepted certain undertakings to settle proceedings for alleged breach of the ruling ( In June 2009 EuroCommerce, the European retail trade body, filed a complaint about Visa’s interchange fees (

    The battle is also heating up in the US, where interchange fees are reported to have risen “14% last year to about $48 billion, averaging an eye-popping 1.75% of total purchases” ( And where it was recently claimed that the “7-Eleven corporate entity and its franchisees paid $160 million in discount fees [mainly interchange] last year, a fourfold increase from five years ago… the expense now ranks as the third-largest on the chain’s financial statement, behind only rent and salaries” ( As a result, there are three bills before Congress that seek to regulate interchange fees ( Two seek to support collective efforts by merchants to negotiate lower interchange fees and ease related restrictions, while the third seeks to deliver a similar outcome to stronger retail bargaining power, e.g. lower fees and freedom to choose payment method by type of transaction/location.


    August 14, 2009 at 06:34

  3. […] “the bankwatch” findet man schließlich eine sehr interessante Auseinandersetzung mit der These von Umair […]

  4. @Pragmatist … great example. Lets challenge anyone to align value received for the cost outlay there.

    Colin Henderson

    August 14, 2009 at 22:47

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