The United Arab Emirates
is known for treating its residents lavishly, but retail banking
customers are suffering post-recession. Farah Halime reports on the
lack of dialogue between the banks and their customers and the
implications this has on debt management and switcher
rates.
Go deeper with GlobalData
As the uncomfortable near
50-degree highs give way to cooler 30s in the United Arab Emirates
(UAE), the temperature
of residents is reaching boiling point. A fifth of banking
customers in the UAE are considering leaving their bank after a
host of grievances revealed basic customer service requirements
were not being met.
The top grievances people
face when dealing with their main bank in the past year are a delay
in answering a phone call (28%) and a delay in resolving a problem
(24%) and unprofessional customer services (22%), according to
research by cashy, the Arab world’s first personal finance website,
and polling organisation YouGov Siraj.
“Banks are not up to speed,”
said cashy founder Nima Abu-Wardeh.
“Banks should be taking the
opportunity to fix a few things with customer satisfaction. These
are very specific things such as not answering the phone. It is all
basic stuff.”
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By GlobalDataThe UAE retail banking
industry, like the rest of the world, is picking itself up after
suffering the effects of a global recession and Dubai World’s
$23.5bn debt restructuring. The boom times, when banks were reeling
in clients with cheap loans, are over and banks have to work harder
to attract customers.
Of 2,788 people questioned
for the study, 18% said they are ‘very dissatisfied’ or
‘dissatisfied’ with their main bank. Half of respondents said they
would not recommend their bank to a friend or colleague, with just
20% likely to do so.
Half of the people questioned
said they had switched banks in the past, suggesting the propensity
to do so again is likely.
Suvo Sarkar, head of retail
banking at National Bank of Abu Dhabi (NBAD), UAE’s third-largest
bank by assets, told RBI the rapid growth of retail
banking in the region over the past decade is to blame for customer
complaints.
“Most banks in the UAE have
not been able to cope with the increasing demands of a growing
customer base, and as a result service standards have been
compromised,” Sarkar said.
In the past two years,
however, there has been a return to the basics of customer
centricity.
“Wallet share is more
important than market share in these challenging times, so banks
are investing more in customer retention programmes, process
optimisation, training and research,” Sarkar said.
For Abu-Wardeh, the root of
the problem lies in the lack of dialogue between banks and its
customers.
Namely, innovations in social
media have bypassed UAE banks. Many banks in the region view social
networking sites such as Twitter as a hindrance rather than a help
because they have little control over what is published.
“The response has been ‘We
are building our own platform’. That is not the point – they are
not part of the dialogue,” she said.
Some UK and North American
banks have embraced the age of social media by creating their own
platforms, and therefore opening avenues to aggregate vast volumes
of honest customer feedback.
First direct, the online arm
of HSBC, is a case in point. It has attracted thousands of user
comments to its social platform, ‘Live’, by inviting customers to
comment freely.
It has since topped several
UK customer satisfaction surveys, such as the closely watch survey
released by consumer research organisation Which? in
August.
Inadequate frontline
staff
The lack of conversation
between banks and the public has been made worse by the lack of
adequately trained staff on the frontline, Abu-Wardeh said. This is
a basic but necessary requirement.
Customer feedback on the
banking experience in the region, although scarce when compared to
the UK, suggests bank employees are failing to meet simple
requirements like answering a phone call throughout the
day.
Employees have a worrying
lack of knowledge about the bank’s products and services, and some
were unable to answer simple questions about how interest rates on
their own bank’s credit card work.
“It is not satisfactory. They
just don’t get it,” she said.
Abu-Wardeh said this was
because the loyalty of a bank’s staff is inward-looking towards the
‘hierarchy’ – the boss or institution – rather than towards
customers.
“It is the banks’ perspective
that comes to the fore not the client perspective. There is no
empathy with the customer,” she said.
Sarkar acknowledged the
problem and confirmed the bank is investing in a training academy,
called Al Manara (The Lighthouse), for frontline staff.
“The academy aims to provide
three levels of certification to all branch staff so that we can be
assured of a certain consistency in our service standards across
our 110 branches,” Sarkar said.
In the next nine months, NBAD
intends to significantly improve turnaround times for all its
important products and services, he said.
The ‘take it or leave it’
attitude among bank staff, as Abu-Wardeh describes it, is in stark
contrast to the UK and North American banking sector, which in the
aftermath of the financial crisis has focused its attention heavily
on pleasing the customer.
Metro Bank is the latest in a
stream of new entrants to the UK retail banking market, that intend
to capitalise on customer distrust of larger banks subject to
government bail-outs. It has marketed itself on the tagline – “love
your bank”.
In the US, Bank of the West,
a BNP Paribas subsidiary, has doubled its investment in promoting
customer satisfaction for 2010. It has already capitalised on its
regional popularity ranking number one in California on the JD
Power Satisfaction Index, a closely watched survey on US retail
banking.
Debt management does
not exist
Managing debt is another
topic that banks are failing to communicate to
customers.
The study showed that high
service charges (22% of respondents), hidden charges (19%) and high
interest rates on banking services (18%) are all points of
contention for customers.
As a result more than
one-third of respondents said they cancelled a credit card in the
past 12 months.
“It is a massive problem,”
Abu-Wardeh said. “Historically the response of banks [to customers
defaulting on payments] has been to freeze accounts, rather than
have a two-way street. The kneejerk reaction has terrified
consumers.”
Abu-Wardeh, who created cashy
because she claimed the dialogue for managing debt does not exist,
said customers were being misinformed about interest and card
charges.
“You would be shocked at the
lack of knowledge. Customers think they are making informed
decisions, without understanding what they are getting into,” she
added.
There are no laws in the UAE
governing misinformation when it comes to advertising. This means
the annualpercentage rate advertised as 1%, actually stands at 20%
at least.
It comes down to a lack of
staff knowledge and therefore communication with customers,
Abu-Wardeh said.
“There is no straight answer
available from a single member of staff or anyone to explain it to
me,” she said.
The problem does not just lie
with inadequate banking practices however.
In the absence of a credit
bureau, many customers in the UAE are over-leveraged, and
conversely banks have had challenges in collecting overdue
payments.
“We are doing what we can to
assist distressed customers – consolidating and restructuring
customer debt, extending loan tenors, and in some cases, writing
off overdue interest payments,” Sarkar said of NBAD’s
strategy.
He also said the legal
recourse is the last option for most banks, “since a customer
behind bars does not necessarily help to collect the
debt”.
Horror stories coming from
the region often publicise bank’s threatening customers with
imprisonment if debts are unpaid, forcing many distressed customers
to flee the country and leave their debts behind.
RAK Bank has about a 20%
market share of the country’s credit card sector with around
300,000 customers.
Last summer, RAK Bank said
the number of customers absconding and leaving debts unpaid on
their card debt was as high as 2,500 a month.
In 2008, a Citibank customer
who said a thief made off with AED40,000 ($11,000) worth of
purchases on his lost credit card, was forced to repay the full
amount, because he reported the loss three hours too
late.
But Citibank said it was
complying with the country’s requirements, which do not only apply
to Citibank but banks across the board in the UAE.
“We have done our level best
to assist the cardholder in dealing with this unfortunate incident,
all within the bounds of the contractual relationship between
himself and the bank,” said Karim Seifeddine, head of corporate
communications at Citibank UAE told RBI.
He said the credit card
agreement specifies that the cardholder is liable for any costs
until they report the card lost.
“You should treat the card as
cash,” Seifeddine added.
But for Abu-Wardeh, the
bureaucracy tied up in challenging a bank is too strong for many
customers to bear.
“There is no redress in this
part of the world,” she added. “You don’t challenge, and even if
you do it sucks your energy and then you pay anyway.”
The only bank that has
overtly said it will manage customer debts is Mashreq Bank. The
bank set up a debt counselling service in 2009 with the sole
purpose of helping individuals restructure their outstanding cards
and loans to ease the pressure of repayment worries.
It is an anomaly on the
banking landscape, however, and many banks still remain out of
touch with their clients.
“If you choose not to respond to people it does not mean
the conversation will go away,” Abu-Wardeh said.
