HomeOpinion & AnalysisColumnistsSo much for KYC, time for KYB

So much for KYC, time for KYB

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Recently, someone wrote to one of the local newspapers complaining about “unprofessional conduct at one top commercial bank” which was described as “both patronising and a strong driver of incompetence.”

Unfortunately the aggrieved customer chose to remain anonymous (so we will call him/her Disgruntled Customer – DC) together with the offending bank, perhaps in keeping with the age-old Shona tradition of kurova imbwa akaviga mupinyu.

The contentious issue was the requirement for every withdrawal above US$100 to be authorised by the bank manager, or worse still referred to the main branch.

A few weeks ago, I used the analogy that “the mountain must now come to Mohamed” for the new banker-customer relationship, but based on this incident, it appears that certain mountains are not ready just yet and poor Mohamed still has the unenviable task of not only climbing such mountains but also has to contend with standing in a queue in order to do so.

DC further said: “This kind of bureaucracy obviously gives the bank manager a sense of authority, especially over the poor as I doubt if they ever do this to well-to-do customers.”

This unmistakable case of financial heartbreak, manifesting itself in allegations of discriminatory tendencies smacking of a subtle form of financial exclusion, reminded me of how in banking we like so much to talk about KYC (Know Your Customer) and even KYCC (Know Your Customer’s Customer) yet almost never talk about what I would call KYB (Know Your Bank).

Perhaps if prospective account holders took some time to know their bankers better, there would be far less financial heartbreak.

One of the key objectives of this column is to engage with the banking public in a way that enables them to get financial “savvy” in order to become more informed consumers of financial services. Accordingly, this week we take some time to look at considerations one should make when choosing a bank.

Finding the “ideal bank” obviously requires one to spend some time doing comparison or “window” shopping because the best deal is unlikely to find you, you have to go out there and find it.

However, if a good banking relationship is important to you, it is not only important but necessary to invest some time in building one and it is up to you how much time you spend doing so.

For those with access to the Internet, most banks have functional websites with a wealth of information on the services offered and the terms and conditions under which they are available.

Nothing, however, beats face-to-face engagement with a CSO (Customer Services Officer) who can answer all your questions about the bank’s products and services.

Most people will make the decision on which bank to use on the basis of the services available and the fees they will have to pay to access them, so we now take some time to review these aspects.

Features
Some of the features and services one might be looking for include:

Interest Rate: Is the account interest bearing and if so what is the current interest rate and how often is the interest credited to the account? Most banks will pay interest on a monthly basis while others may, depending on the type of account, calculate interest on a monthly basis but credit it to the account at some other predetermined interval such as quarterly basis.

Minimum deposit and withdrawal amounts: Is there a minimum threshold in terms of the amount that must be deposited in order to activate the account? What minimum balance must be maintained in the account?

Limitations: What limitations, if any, are imposed on the account, perhaps in terms of the number of transactions per month or in terms of the maximum withdrawal amount above which special approvals will be required such as in the case of DC? Accessibility of funds: How soon after depositing the funds are you able to make withdrawals against them? Tetrad’s Gold Fund, for instance, allows withdrawals after a period of 60 days.

Deposit Protection Insurance: Enquire about the extent of the deposit protection available to you. The Deposit Protection Board was set up to protect depositors in commercial banks and other institutions licensed to operate banking business in Zimbabwe against the worst consequences of bank failure. It offers limited coverage and guarantees that small depositors will be paid in full up to the insured amount in the event of bank failure. One of the key benefits of this kind of insurance is that it can complement banks’ deposit mobilisation efforts.

Bank Size: Some people feel more secure dealing with the so-called traditional banks because of their bigger balance sheets and branch networks. Others however believe that the quality of their service is inversely proportional to the size of the bank – the bigger the institution, the more lethargic and inefficient it is, while smaller banks are, perhaps not burdened by overconfidence and bureaucracy, believed to be more nimble-footed and responsive to customers’ needs.

Convenience: An extensive branch, ATM and Point of Sale (POS) network will usually translate to convenience, as there is likely to be a branch, an ATM or a POS terminal near where you live or in other places you may visit from time to time. What are the bank’s opening times? Do they offer extended banking hours?
Services
Banks offer a variety of products and services, some of which are peculiar to specific banks but the generic ones available at most competitive banks include ATM services, mobile banking, Internet banking , credit cards, debit cards, overdrafts, travellers’ cheques, stop orders, loans, international banking facilities, account statements, safe deposit box rentals and bill payments. Find out what your desired bank offers.
Charges
High transaction charges are currently a matter of concern to most users of banking services in Zimbabwe and against the background of constrained incomes, every dollar counts so it is worthwhile to shop for a bank that will give you the most value for your hard-earned money. The Reserve Bank has now put the issue on the regulatory agenda and made it mandatory for banks to regularly publish their charges, something that had been killed by the hyperinflationary era. Some of the common fees one will encounter are as follows:

Maintenance fee: This is meant to enable the bank to recover the cost of maintaining your account; after all they are providing you a valuable service. It is usually a small fixed fee which is debited to the account even if there is no activity while ledger fees cater for the volume of transactions.

Withdrawal fees: How much does the bank charge you for making a withdrawal? Currently, just making a withdrawal at some banks can set you back a cool US$10, wiping away probably half a year’s interest earnings. US$10 can buy you 10 loaves of bread, and if you think of it in those terms, it is a significant amount.

ATM charges: How much does the bank charge you for a withdrawal from their (proprietary) ATM and from a third-party (non-proprietary) ATM?

Transfer fees: How much does the bank charge for an internal or inter-account transfer and for an interbank transfer?

Unpaid cheques: Some banks will charge you if someone writes you a bad check and you will certainly incur a heavy penalty for “bouncing” a cheque so it is always important to know in advance what the damage will be in order to avoid nasty surprises.
Statement charges: What are you expected to cough up for interim and monthly statements of account?
Using the above criteria, it is possible to come up with some kind of scoring model that will enable you to choose the bank of your dreams. Coming from an era in which a bank account has been considered as a privilege which the bank can grant or withhold as they see fit, most people are still intimidated by banks and may feel that they have to accept whatever shoddy deal is placed before them.
It will therefore be some time before consumers feel emboldened enough to be selective about whom they do banking business with, but as the competition heats up in the sector, the realisation that his/her custom is king will strengthen the customer’s hand.

Omen N. Muza is a banker and Managing Director of TFC Capital (Zimbabwe) (Pvt) Ltd. He writes in his personal capacity. Feedback: omen.muza@gmail.com

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