“One way to make money
providing financial services is to charge an explicit fee, commission, spread,
etc., where the customer knows what she's paying you. Another way is to
structure a product to be profitable to you in expectation, in a way that is
not transparent to the customer. You can mix and match, but stereotypically,
you make less money when the customer knows what you're making than when she
doesn't. Because you're probably making more than the customer wants you to
make. You are overpaid, is what I'm saying here, and your customer either does
or does not know it.
This is fairly obvious,
and so banks often prefer non-transparent businesses to straightforward
fee-based businesses. Here is a delightful Financial Times article about
banks trying out that theory on their own employees…”
for the full blog posting along with links to the original article.