South African consumers are increasingly voting with their feet to protest against poor and expensive banking services in a move away from the perception that changing a bank is too cumbersome.
Recent findings from Ernst & Young’s Global Consumer Banking Survey for 2012, found that despite these hassles, South African bank consumer attrition had increased from 34% to 39% over the past year. Bank charges and higher fees were cited as the main reasons for leaving. Bank fees were raised in 2012 in order to recoup a loss in interest income.
However many South Africans are still trapped in the “until death do us apart” attitude where banking is concerned. Despite being dissatisfied with their banks’ service offering most local consumers choose not to switch to another bank, due to the perceived administrative ‘headache’.
Gary Palmer, CEO of Paragon Lending Solutions, says that people who struggle to secure finance with their bank tend to give up believing that this is their only option. “Despite being unhappy with their bank for whatever reason, many customers continue to trade with the same bank.
“The increasing costs of bank fees for routine services, uncompetitive lending rates and poor experiences are common reasons why someone would want to leave a bank.”
According to a recent survey by the US’ Consumer Reports National Research Center, one-fifth of all consumers considered moving to a new financial institution because of frustrations with their bank and an increase in bank fees.
However, Palmer says that despite a willingness to leave, most do not follow through and with a handful of banks to choose from consumers are hindered from moving because there is a perception that moving from one bank to another requires significant time and effort.
He says some bank policies made it harder for consumers to leave while other obstacles can arise that make the process of switching a bank more of an issue. “In South Africa, there is extreme competition to attract and retain clients in the transactional banking space. Banks charge additional fees for transferring between accounts; there are hassles with transferring automatic payments; different banks have different rates in place and customers then have to get accustomed to a new brand, products and services, which makes it difficult for consumers to move accounts and transfer money. There is also the issue of brand loyalty and product identification.”
Furthermore, Palmers says that banks are being stickier about lending as the current climate requires the banks to make up for the costs of lending. “This causes lengthy delays in the loan applications and often leaves consumers frustrated if they require urgent funding for an investment or a quick financial injection into a business opportunity.”
Palmer says that investors should consider all the options offered by other banks and discuss their requirements with an asset-backed specialist if they are struggling to secure finance from a commercial bank.”
“Investors who require short-term finance have other options while they consider moving banks. Reputable second tier lenders can assist consumers by providing them with an assessment. Because they have good relationships with the banks, they can point them in the right direction and can advise investors on how to structure the finance that is necessary”.