When Customers Revenge found out I was a banker, he contacted me so we can team up together and talk about banks and their ability (or inability) to provide financial services. He recently posted his first drafts as of to why he thinks Banks might be creating “conscious strategy to lure customers and then systematically separate them from their cash“. I will try to answer his concerns to the best of my knowledge. Disclaimer: this is not meant to be an official bank’s answer to a client’s concerns but really a discussion between two humble bloggers.
|I would start my article by quoting Customers Revenge : “Banks should be among the most trustworthy, on your side, competent businesses you ever have to deal with”. Honestly, banks should be considered as any other companies that are selling products. It does not matter if they are selling financial products or vegetables. In fact, I feel more betrayed by groceries store who barely advertise their genetically modified products than by a bank charging extra fees that were previously disclosed in its contract. Many people have the wrong tendency of seeing Banks as being part of the government or think that they have to be responsible for them. Even if they are active in the financial industry, banks are like any other type of companies; their main goal is to make profit. From his post, CR seems to have a lot of issues with bank accounts and the charges related to its usage. The first thing we must understand is that in Canada, unfortunately, we have a very limited bank industry. The fact that the government is controlling this industry slows down the arrival of other competitors in the market. When businesses evolve into an oligopoly, customers are being charged from West to East and can not do much about it. While customers feel abused by banks, this restricted environment brings economic stability, protects customers from financial institution’s bankruptcy and insures certain level of services.The money system is more complicated than it seems. CR uses the example that a bank only have to electronically transfer $100 from your account to the grocery’s account when you make a purchase with your card. However, banks have to balance out all transactions at the end of the day to make sure all the money have been sent and received in the right accounts. The last things banks want is to retrace money that did not go into the customer’s account (remember what happened to RBC a few years ago?). Along with this, electronic transactions are followed by security agent to prevent fraud from their clients. There is another reason why banks have to monitor all deposit into their accounts. This reason also explain as to why they don’t charge for deposits. It is because they need your money to exist. Banks are regulated by federal laws in regards to how much money they are allowed to lend. This amount is directly correlated to the amount of deposit they hold. To make it easy to understand, suppose that banks can lend five times their deposit. At the end of each day, they have to calculate how much they hold money and how much they lend. If they have $100, they can only have up to $500 in the lending market. If they have more, they have to temporarily borrow money from the Bank of Canada at the prescribed rate in order to meet the ratio. As they need your money to operate their business, they are more likely not to charge for deposit in order to encourage the money to come to them.In regards to the extra charge on inactive bank account, I think it is a great example where customers feel unfairness. In fact, this feeling is more related to their lack of financial knowledge than by a real scam built by banks. In fact, if you are not to use your bank account for a year, you should have done two things before singing your bank account opening form: #1 read all the fees related to id, #2 open a savings bank account. A major mistake made by several bank employees is that they take for granted that their clients know what they want and what they need. Too often, a client knows what he wants but it is not what he needs. People a really proud when it comes to finance, unfortunately, this pride should be place elsewhere. This is how banks are not asking too much question and then provide their clients with what they ask. I am not defending banks on this point as I think they should be more proactive on this side. The good news is that I see a major improvement in the recent years in regards to client services. Banks slowly realize that they have to prepare themselves for the competition as the Government is slowly opening the door to other competitors.
I think that most of clients issues are a mix of clients pride to not ask questions and misinformation and lack of quality in client services from banks. However, there are several competent bankers that can help to manage your personal finance. As it is the case with many other companies, you have to shop around to get the best service on the market. I would also be curious to know more about CR’s experience with customer service representative and his loans.
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