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Better banking services for pensioners

22 October 2009 Gareth Stokes
Gareth Stokes, FAnews Online Editor

Gareth Stokes, FAnews Online Editor

Banks have come in for a fair amount of criticism in recent years. Customers list poor service and outrageous transaction fees as their top concerns. The negative industry perception culminated in an extensive investigation by the Competitions Commission into bank pricing practices. Banks participated voluntarily in the enquiry which took place from August 2006 to June 2008. Upon completion the Enquiry Panel issued a statement with “28 recommendations aimed at addressing concerns raised by consumers, small and prospective banks and non-bank stakeholders.” Fifteen months down the line and little has changed. Do banks put the interests of their customers first or are they simply extracting maximum fees and commissions for the benefit of their shareholders?

Every now and then we stumble across some ‘feel good’ news from the sector. One example is Absa’s decision to celebrate International Day for Older Persons (1 October) by dedicating the entire month to its senior customer. After reading the press release FAnews Online decided to ask Keith McIvor, Absa Managing Executive for Customer Market Solutions for his views on senior citizens, retirement savings and the country’s un-banked.

Helping the un-banked

Our point of departure was to determine the size of the seniors market. According to Absa the segment comprises some 5.3 million people, of which only 2.8 million are banked. Absa has 1.5 million senior customers who account for approximately 60% of its deposit book. We asked McIvor what Absa was doing to reach more of the country’s un-banked seniors.

He pointed out that the ‘big four’ banks have steadily chipped away at the un-banked population, reducing it from 18 million citizens in 2002 to 12.9 million by the end of 2008. “This reduction is attributed to industry wide financial services participation making banking more accessible and affordable than ever before,” said McIvor. Absa’s attempts to reach un-banked seniors include assistance to its Pensioners Grant Customers. Absa – with Allpay – provides banking guidance and affordable products to this segment!

Services for existing senior customers

How does the bank address the unique needs of its existing senior customers? We asked McIvor what the bank was doing to ensure its senior customers were correctly banked with specific reference to the rumours of senior account holders holding hundreds of thousands of rand in low interest savings, cheque or transaction accounts.

McIvor says the solution is in providing better service to this segment of the market. “We are continuously training our frontline staff in our branches, especially in‘Senior Friendly’ branches, on ‘senior’ products,” he said. Bank staff (particularly at these branches) would be able to assist senior customers with the most appropriate savings and/or investment products. The bank would also “continue with its regional senior customer events (such as Pensioners Days and Senior Financial Forums,” said McIvor. These initiatives educate senior customers on the products best suited to their needs. Senior citizens should be encouraged to develop strong relationships with their financial advisers through retirement too.

Poor savings rate must be addressed

The common theme at seminars addressing the domestic retirement industry is that South Africans don’t save enough. Although estimates vary, the consensus is less than 10% of citizens who reach retirement age will enjoy financial independence through retirement. Why does South Africa have such a poor national savings rate? Can we blame poverty or should we be addressing attitude? McIvor believes there are a number of factors contributing to the problem. These include “the country’s socio-political history, relatively high levels of unemployment, sustained periodsof relatively high inflation and interest rates, a ‘consumption’ mindset amongst certain sub-segments of the market and lack of financial access and appropriate financial literacy.”

And the final question: Would Absa consider a ‘no strings attached’free banking offer to over 65s? McIvor didn’t take the bait. “Absa is extremely conscience of the needs of our senior citizens,” he said. The group already provides free basic banking to clients “provided they retain certain balances.” He added the bank remained open minded about possible future product innovations.

Editor’s thoughts: There is plenty of room for innovation in the domestic banking environment. We argue that the country’s largest financial institutions could easily carry the cost of providing free basic banking services to, for example, the over 65s. Is it time for South Africa’s big four banks to follow their international peers and offer free basic savings accounts? Add your comments below, or send them to gareth@fanews.co.za

Comments

Added by cynthia, 22 Oct 2009
Most of the time I feel that this quote is spot on as a 'yes' answer, ' Do the banks put the interests of their clients first or extract maximum fees and commissions for the benefit of their shareholders?' I mean really, why do we have to pay admin fees to deposit our own money into our own bank accounts? We are doing the banks a favour by those deposits and increasing the balances so that it can be further utilised. Yes, I agree with you Gareth, 'FREE BASIC BANKING SERVICES TO THE OVER 65's.' The banks can afford to do this. Thanks for all the interesting financial information and comments. Regards Cynthia Botha
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Added by Burke Williams, 22 Oct 2009
Gareth, Banks dont care about any of their clients! Gone are the old days of "my bank' and of your aboility to see your Bank Manager. Banking as a profession devolved from employees wno started at the lower rungs ,became tellers then rose into managment , and in the interim they were well trained . Today Graduates and C.A.s have permieated the industry to the detriment of Joint stock Banking AND no amount of complaints, adverse articles or pleading will change the goal of getting as much out of the consumer as possible .
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Added by Johann, 22 Oct 2009
There is no such thing as personal banking or personal service anymore. Decisions are taken by nameless "systems" who have no sympathy for you. Don't dare to exceed your overdraft limit by one cent and don't even ask to speak to a manager, personal banker or whatever as they are not in a position to take any decisions. Banks milk their customers with all sorts of fees, costs, etc which makes our banking costs close to the most expensive in the world. No wonder they can sponsor rugby, soccer, cricket, golf, TV shows and pay exorbitant salaries and bomuses to their fat cat CEO's!
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Added by GT, 22 Oct 2009
There's no question about it - we are being exploited by the banks and their shareholders. But I would like to go a step further. Should the banks decide they are going to revise their fees and do away with certain charges (deposits, etc) who really stands to lose? The Governement? No more VAT collection on those fees for them so I wonder, is it only the banks that are against it or might it be "pressure" from Govt? That is why the Competitions Board got nowhere.
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