If everyone dislikes a banker why do they continue to lend them their money for free?

Even in the most egregious case of breach of trust by a bank - i.e. Wells Fargo example - the money that was unauthorizedly transferred from a customer's account was transferred to another account in the name of the same customer. That's a lot of things but it's not stealing. Whereas when PayPal freezes a merchant account, the merchant never gets back the fees charged by PayPal. That's what I call stealing.

Therefore, inertia is not the reason why people still lend their money to banks. Lack of equally trustworthy alternatives is. Even in the post Wells Fargo world.

Good evening KS, thanks for your comments. May I respond with that I am not saying people lend their money to banks due to inertia, what I am trying to point out is that people suffer a suboptimal return on the money that they lend to banks due to inertia, not because of a lack of options to increase that return.

Sorry, but I agree with KS. There is a lack of trustworthy alternatives. My experience of pensions and investment management companies is that they are run for the benefit of shareholders and senior management, who receive their returns & pay and benefits regardless of the performance of thier investments. Investors are bottom of this pile. The UK stock market is lower today that on 1st January 2000, and very few pension / investment companies have beaten the market. Cash, on the other hand, has seen a 75-100% return during the same period - interest rates were much highe up until 2008.

Good afternoon MH, thank you for your comments, much appreciated. Let me give you an example of what I mean and try and bring some clarity to what I am attempting to articulate. If I have £1 million at my HSBC account which pays me 0.10% p.a. in interest I will, over the course of a year, earn gross interest on that capital of £1000. If, however, I move my money to Nationwide Building Society and earn 1.00% p.a. in interest then over the course of that same year I would earn £10,000 p.a. of gross interest. Therefore, it is not the lack of available options (trustworthy or otherwise) that stop me from earning more money in this scenario, it is merely the fact that inertia and perceived hassle stop me opening a new bank account and transferring the cash. I hope this sheds some light on my thinking.

@MelvinHaskins: I've had exactly the same experience with leading AMCs. 20+ pages of T&Cs for a consumer product, complex formulas to calculate NAV that can't be understood even by the AMC's own call center and branch staff. More in my blog post titled Puzzle Versus Mystery: Who’s To Blame For The Great Recession (hyperlink removed to comply with Finextra Community Rules but this post will appear on top of Google Search results when searched by the title)

@JeremyStevens:

TY for the clarification. I now get your point. What you call "inertia", I call "calculitis" - the inability to whip out a calculator to do even basic math. IME, it afflicts 90% of humankind. PFMs like Mint came into existence around 10 years ago with the promise of fixing this problem by doing the heavy duty lifting of calculations by themselves and presenting only the insights for consumers to take action easily. Sadly, the problem seems to continue even now. 

On a side note, I read once that RBS refused a deposit from a customer because it could get funds from some other source (BoE?) for much cheaper. Is that a factor in this discussion? In your example, if the customer moved their GBP 1M away from HSBC, is there a reasonable guarantee that Nationwide would accept it at 1% interest rate? What if 100 customers did that? 1000 customers? 1M customers?

Good morning KS, thanks again for your interest. The market for deposit rates is fluid like any other and pricing is dictated by each banks individual funding requirements at any one time and the potential sources for that funding, of which retail deposits is one. Just like equities and bonds (or any other asset class for that matter) the price is driven by supply and demand. Using your example, but transferring it to equity markets by comparison, you could reasonably expect an equity price to stay the same if 1 person bought it, possibly the same if 1000 people bought it, but if 1m people buy the same equity it is likely to have an impact on the price. The same is true with deposit rates. The important point persists however, just because one bank reduces a rate it doesn't mean that there isn't value elsewhere in the market. Depositors have become conditioned to believing that 'all banks pay the same' or indeed have become just too lazy to look or do anything about it. Increasing your interest income 2-5x is perfectly achievable for the vast majority and easy with the right tools. 

@JeremyStevens: TY for your reply. Like I hinted with Mint, tools might not work in a B2C environment. Assuming your company sells such tools, have you tried an outcome-based service enabled by your toolset? Going by the success of PMS, your toolset's ability to deliver 200-500% increase in interest income could make a blockbuster out of such a service.