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Is your bank treating you unfairly?

Friday, January 25, 2019

At Dialdirect, customer service is something we really care about. We like to keep things simple and transparent. Whether you’re taking out car insurance or applying for a personal loan, you can get the cover you need without any hassle.


But, are you getting the same treatment from your bank?


With banks cramming ever more useful features into their online services and mobile apps, a visit to physical branches to deposit money or request a statement is less of a necessity these days. Even ATMs have become capable of innovative self-service solutions such as paying municipal bills and traffic fines. 

Thumbs up to our banks for making it more convenient to deposit money or request a statement. However, despite efforts to make banking easier and faster, a percentage of the population is still grappling with a variety of challenges to manage their everyday financial activities. This is according to the World Bank, which found that SA banks’ financial products do not currently benefit lower-income customers, who are still mainly dependent on branch and ATM services. In a report titled “South Africa Retail Banking Diagnostic: Treating Customers Fairly in relation to Transactional Accounts and Fixed Deposits” published by banking watchdog, the Financial Sector Conduct Authority (FSCA), the following key problem areas were identified:


  • Complex product design that makes it difficult for customers to compare products
  • Potentially unfair terms and conditions
  • Potentially unfair fees
  • Wide variation in what, when, and how information about product features and pricing is disclosed
  • Gaps in regulation, and inconsistencies in how regulation is applied


Transactional products offered 


The report concluded that many of the transactional products offered by banks put low-income customers at an unfair disadvantage. While the different accounts designed for different income groups share the same basic features, higher-income customers are the beneficiaries of low transactional fees as they mostly bank online. Lower-income customers usually prefer cash-based transactions, which tend to incur higher fees. Even though banks are encouraging them to use digital channels, the high cost of data remains a barrier to their financial inclusion.


Excessive charges


Banks have also previously applied unfair charges. Citing an example of a customer not having sufficient funds in their account to cover a debit order, the report says that banks tend to levy excessive charges that are significantly higher than what it would have cost them to handle such transactions. The FSCA noted that while banks have since revised their penalties, there remain issues that may be regarded as rip-off practices. Aside from these unpleasant surprises at the ATM, the World Bank found that customers do not receive enough support from banks when opening, closing or switching an account, and that some processes such automatic roll-overs of fixed-term deposits are too complex to understand. “The findings are deemed to be potential shortcomings because while the conduct of banks is not necessarily in breach of legislation or regulations, it may fall short of fair treatment principles and international best practice (or experience),” Treasury commented on the results.


The FSCA presented a number of recommendations that could help improve the banking system, including legislation that will require the processes for developing and making changes to transactional accounts to be as customer-friendly as possible, as well as new measures for designing transactional products to benefit low income customers.