It adds up to billions of dollars, euros, or yen. The absolute numbers differ by country, but the story is universal: Banks across the globe distribute staggering sums to shareholders as dividends. These profits rarely emerge from innovation or the creation of real economic value. Instead, they are extracted directly from citizens through inflated interest rates and endless fees – a mechanism that functions like a tax in disguise. The public pays, the banks distribute, and governments collect again through dividend taxation. Citizens shoulder the cost twice, while regulators and policymakers stand aside.

It is always the same groups that bear the heaviest weight: families, workers, and the already strained middle class.

They sacrifice time, stretch their incomes, and absorb constant economic uncertainty. On top of this, they face suffocating loan costs, meager returns on deposits, and opaque fees. Rather than protection, they are met with silence. The result is widening inequality: Those already carrying the burden are precisely the ones being squeezed harder.

The problem is not just extraordinary profitability. It is the concentrated structure of financial markets worldwide. Governments boast of reforms designed to “increase competition,” but too often these moves are cosmetic, like giving apples to someone with no teeth. In practice, the public continues to pay high interest on loans, earn negligible returns on savings, and shoulder unjustified fees.

Even when new competitors enter the market, the incentives remain unchanged: Why would a new bank or fintech drastically lower interest rates or cut excessive fees if the public does not fully understand the terms and does not push back?

The model is too profitable to disrupt, leaving citizens trapped in a system designed to funnel wealth upward. We see this in Europe, where the entry of online banks was expected to transform consumer finance.

Instead, many digital players quickly adopted the same pricing structures as traditional banks, charging high fees on overdrafts, offering minimal interest on deposits, and relying heavily on cross-subsidization from customer inattention. In the United States, too, despite dozens of “challenger banks,” the gap between what banks earn on lending and what they pay on savings remains enormous. New players promise innovation, but when the public does not demand better terms, they align themselves with the old model rather than challenge it.

This reality underscores another deep divide: financial literacy. When citizens lack the tools to understand basic financial concepts or compare banking products, they remain dependent on the very system that exploits them.

Governments, unfortunately, often have little incentive to change this. A financially passive public makes it easier to collect taxes and fees without broad resistance. For states, it is more convenient to benefit from taxing dividends than to demand fair competition or invest seriously in financial education.

Banks respond to criticism with grand declarations of “standing alongside the public,” by suspending fees for a short period, easing payments temporarily, or launching campaigns wrapped in the language of solidarity. Yet behind the slogans, most of these measures are narrow, temporary, and filled with conditions. They serve more as brand polishing than real relief. Meanwhile, profits continue to flow, and inequality deepens.

The solution requires two parallel efforts. First, regulation: setting clear ceilings on interest rates and fees, mandating fair interest on deposits, simplifying financial language, and enforcing transparency in every transaction. Second, financial education: equipping citizens with the tools to understand, compare, and choose wisely. Without both, talk of “competition” will remain little more than an empty slogan serving the strong at the expense of the weak.

The question is not whether this system can be changed; it can. The real question is whether decision-makers have the courage to challenge entrenched financial power. As long as the preference is to protect extraordinary banking profits rather than the public, citizens worldwide will continue to pay the hidden tax once to the banks, and again to the state.

The writer is deputy CEO of InsurTech Israel.