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There is another commodity glut out there and it is called money and it is posing a huge challenge to the banking industry.

Just like the oil that threatens to spill over the tops of storage tanks, a great tide of liquidity is swamping the world's banks. Thanks to government money printing and weak economic growth, the pool of liquidity in the financial system is rising but banks don't want to bear the cost of storing other people's spare cash.

We could soon be moving into a world where banks charge you for the privilege of lending them your money. It's already happening at the high end: in February, JPMorgan gave warning to its larger customers, fund management institutions and hedge funds that it would begin charging for "non-operating deposits."

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According to The Wall Street Journal, the threat chased $150-billion (U.S.) in funds away from the coffers of the Wall Street giant. State Street Corp. is also believed to be charging for big deposits and in May, HSBC said it would charge customers for deposits in some European currencies.

Short-term deposits have become an expensive nuisance for banks. Since the financial crash, regulators have been forcing lenders to match short-term liabilities, such as deposit accounts, with more equity capital, as a bulwark against market risk. Against that higher business cost, banks find themselves in a low-profit margin environment with central bank interest rates reduced to fractions of a per cent.

HSBC made its move after the European Central Bank moved one of its deposit rates to negative territory, effectively forcing banks to pay the ECB for the privilege of parking cash with the institution. Sweden, Denmark and Switzerland, too, have imposed negative rates in a bid to deter flight capital and encourage investment.

But the policy tools of the central banks are not achieving their objective, which is to get money circulating into a productive, upward spiral of consumer demand stimulating investment. The money-creation activity of central banks, the awkwardly named quantitative easing, has done little more than pump more "oil" into the storage tanks of the big banks when what is required is more demand for gasoline from paying retail customers.

The banks are stuck, their wheels spinning, deeper into the mud. The conventional retail banking model of taking money from customers, paying a small deposit rate and lending it on at a margin while charging for money processing services – payments and transfers – is almost broken. The world's economic engine is still trundling in first gear; interest margins are thin and will get thinner. While the wheels of the banking industry spin in the ditch, a band of thieves is watching, waiting for the opportunity to steal the core business.

The tech companies are already supplying payment systems, such as Apple Pay and PayPal. Attracted by the opportunity afforded by the Internet and their legions of customers, the fintechs have picked the low-lying fruit but it is only the beginning. If you trust a company to move your money about safely, it is just another step to ask them to manage it for you.

Amazon is now lending money to select retailer customers in the U.S. and the U.K., providing seed capital and cash flow management to small businesses, a service that should be at the heart of local banking. It cannot be too long before a tech company enters the savings and fund management sector, offering consumers simplified investment products and index-tracking mutual funds with ultra-low management fees.

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Canada's banks had some good results in the last quarter but no one should be fooled. It is a lull before the storm. The Canadian economy is flatlining, still waiting for its big southern neighbour to drop some cash over the fence. Yet, it remains unclear whether America will provide or, indeed, why it should be so generous when natural resources are abundant and subject to buyers' whims.

Meanwhile, financial services account for about 10 per cent of Canada's GDP and, by implication, ought to play a key part of any economic recovery. Whether that happens will depend on how pro-active Canada's big financial players are in adapting their business models.

Most banks still don't get the world that will soon be upon us. For generations, people have opened bank accounts, not because they wanted one but because they had no choice. You needed a bank account to get paid, to get a credit card, to buy a car or a home, to keep your savings. Any banker who still believes in this world is probably auditioning for redundancy. The banking sector has yet to find its way out from beneath the mountain of public opprobrium left by the financial crash.

However, even that is not the worst of it. If banks cannot afford to pay their customers for deposits, they must begin to charge handling fees to their retail customers. The challenge for the banks is to bring their customers into the harsh light of the brave new world, without losing them altogether.

Carl Mortished is a Canadian financial journalist based in London.

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