Many people rightly attribute the financial crisis of 2008 to “greed”, Wall Street (meaning the banks), and free-market capitalism.
In the absence of effective regulations, the reckless financial practices of both conventional and shadow banks (hedge funds and credit insurance providers, for instance) brought untold misery to millions of people around the globe. Still it’s clear that many banks haven’t learnt much from the Great Recession of 2008 and continue to use shady practices that cost customers substantial sums of money. It seems like customers might be trying to hide from the banks, but the banks keep coming up with creative ways to pick their pockets.
Now if you asked St. Lucians how they view the local banking industry, most people would probably let off steam by deploring the deceptive overcharging practices and account fees imposed on them. Financial institutions are taking their cut with each dip of the debit card by charging ridiculous fees at their own ATMs. Essentially, customers feel that companies involved in the financial industry take advantage of them for financial gain.
I’ll be the first to admit that walking into a commercial bank on the island isn’t often a delightful experience. Retail banking is not what it used to be. The relationship between banks and customers no longer feels personal. Fees and penalties for everyday banking have never been greater. Above all, poor branch access, shoddy customer service and the automation of banking services are representative of how bank-customer behaviour has changed. Perhaps this is one of the reasons why consumers do not have the same kind of loyalty they used to have.
With so much banter in the media about how little people think of the banking industry, it can be easy for individual banks to sidestep responsibility for their less-than-stellar image. Much of the problem has stemmed from an attitudinal shift away from the customer and towards money-making. It has become clear that having an aggressive sales culture which more often than usual rips off customers, has cost banks dearly especially in terms of their reputation and trustworthiness.
For an increasing number of people in our country, financial resources are hard to come by these days in the present economic climate and it’s even harder when everyone has to put up with outrageous and unlawful fees and charges just to operate their bank accounts. Why should any customer have to pay a fee for opening or even operating an account at a bank? Isn’t the notion of operating free customer accounts and accepting deposits for financial value creation the very basis for the existence of commercial banks? Why are local banks short-changing customers in that regard?
Allegations have been made about excessive bank overdraft fees as well. Financial institutions may be manipulating your transactions to charge you an overdraft fee. Some of the tactics being employed by the banks lead to penalty fees such as allowing customers to overdraw on their accounts then charging them, and delaying processing payments to allow accounts to go into the red and incur fees. Some institutions even go as far as putting account holders in overdraft protection programmes they didn’t ask for. Isn’t there a regulatory body that can tell us whether most of these fees are legally enforceable?
Why have some commercial banks placed a maximum limit of 300 euros on foreign cash transactions involving that currency? In a nation where tourism is the biggest service industry and where attracting foreign direct investment has been made an urgent priority, how does this help particularly when there is so much emphasis these days on the “ease of doing business”? What this means is that a visitor who wants to change 500 euros will now need to go to two different banks in order to conduct a simple transaction. Just think of the consequences this can have for restaurants, boutiques and other tourism-dependent businesses.
While many bank branches have disappeared causing much inconvenience to loyal customers, bureaucratic red tape has increased in terms of the processing of transactions, making eventual reforms both imperative and inevitable. We need to start pruning the regulatory forest in order to eliminate superfluous bureaucracy in banking. Take for example the huge amount of paperwork and time required in conducting a transaction at a commercial bank in the island. To be disarmingly blunt, banking bureaucracy in St. Lucia is a suffocating nuisance.
How can you even plan your day productively when you are frustratingly held up at commercial banks and asked to produce all sorts of utterly pointless documents for a simple financial transaction? This is truly an issue of productivity, needless to say that inefficient banks cost consumers and businesses significantly in terms of time and productivity. One would have thought that the advent of technology would fundamentally changed the delivery systems banks use to interact with their customers and would have transformed the banking industry from “paper” banks to digitized and networked banking services. Technology was supposed to reduce the cost of banking for both banks and customers, but as it appears the value impact of technology at local banks is yet to be felt.
For banks as with most other businesses, customer engagement is the true driving force behind financial outcomes. Given the rough patch that banks are going through, I would think that customer service would be seen as an attitude rather than a department. Banks need to change their image as unconscionable institutions whose only concerns are profit maximization and cost reduction. A culture shift back towards putting customers first is needed for trust to be regained; and you can’t simply change that culture by making announcements and pronouncements from the top.
Given all the aforementioned issues confronting local banks, is it any wonder that credit unions have become hugely popular? These member-owned co-operatives now provide customers with a range of useful services at low cost including current accounts, payroll deductions, standing orders and even insurance. On its website, the Laborie Co-operative Credit Union declares, “We are not a bank, we are better. To others you are a risk, to us you are family.”
I believe banks can play a bigger role in addressing the social challenges of our time. Retail banks used to be organisations embedded in communities and played a social role, but now there is a transaction and trading-based culture instead of relationships. One can’t help feeling that there is a culture of “socially useless” banks that have become disconnected from the real economy.
For comments, write to [email protected] – Clement Wulf-Soulage is a former university lecturer, business economist and author.