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No free lunch for banks
2006-06-06
China Daily
In stark contrast to their eagerness to woo investors, particularly those from overseas, Chinese banks' indifference to domestic customers goes beyond our comprehension.
Against the public's strong opposition, China's major banks have all decided to observe the "international practice" of charging for transbank information inquiries from the beginning of this month.
The extra revenues that domestic banks can easily make out of this once-free bankcard service will help improve the appearance of balance sheets that have long been marred by masses of bad loans.
This may be of vital importance to major Chinese banks as they race against the clock to get listed overseas, a strategic step to prepare them for fierce foreign competition after the sector is fully opened next year.
Given the little, if any, additional costs these banks have to pay, the fees collected from this information inquiry service almost seem to be a free lunch for them.
Some deputies to the National People's Congress recently added their voices to calls for a temporary suspension of such charges until a public hearing is held.
Yet, as long as the banking authorities do nothing to intervene, domestic banks will continue to turn previously free services into new sources of profits.
In the sense, to transform themselves into commercial banks, Chinese banks' aggressive pursuit of more profits may be laudable, at least, to those shareholders who demand high returns from their investments.
But customers must not be expected to pay the price for this.
It is short-sighted for Chinese banks to put short-term profits over the long-term loyalty of their customers.
Chinese banks have a greater responsibility than simply seeking returns for their investors. They also have an obligation to help maintain the country's financial stability, as well as to meet people's growing demand for better financial services.
Unfortunately, domestic banks' desire to make money from formerly free services demonstrates that they have failed to strike the necessary balance between all the stakeholders they must serve.
Banks that indulge in action that puts their customers at a disadvantage will find that it does them a great disservice.
Admittedly, the customers currently can do nothing but accept whatever terms these banks impose on their services. But by taking such action, these banks are losing public support that will be vital if they want to be able to compete with international banking giants.
Although they are short of the management expertise, skills and products that make a competitive commercial bank, Chinese banks still enjoy an overwhelming domestic popularity that foreign competitors have craved for years.
Chinese banks should have come up with concrete efforts to better tap domestic customers' loyalty. Being indifferent to customers' complaints is just too serious a mistake they cannot afford to make.
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