> So what banks are actually competing over is the people who happen to be shopping around for a new bank- something most people do only a handful of times in their life.

It's worse than that. I shopped around for a new bank based on my needs -- I picked Capital One specifically because of their advertised "no foreign transaction fees". [In fact, there's a fee around 1%, it's just not called a "foreign transaction fee". But 1% is low enough for me.] Interest on savings accounts didn't register at all.

And really, interest on savings accounts shouldn't register for anyone looking for a bank account, because savings accounts are a terrible, terrible way to invest your money. If you have money in a savings account for the purpose of earning interest, you're doing it wrong.