Empowering the Bank Customer

Social media is rife with stories of customers being defrauded by bank employees. There was a recent story on Facebook about a customer of a reputable local bank who went to withdraw US$5,000 only to discover when he got home that he had instead been given 50 notes of US$1 denominations each, amounting to US$50 in value

I have also seen several stories of people claiming they were defrauded on various bank digital platforms and their banks resoundingly doubting them and branding them accomplices.

When such cases are reported to the banks, more often than not they are ignored. The Banking Sector Charter (BSC) mooted by the Central Bank of Kenya now has guidance on complaints handling. Banks must acknowledge complaints received from customers with in 48 hours and resolve them within 7 days. If not resolved in 7 days, then the customer must get a progress update every seven days.

Granted technology is a challenge for quite a large number of customers leaving them vulnerable to fraudsters but some of the incidents we have witnessed reek of negligence on the part of the banks. Why for example can’t a bank be responsible enough to ensure that the CCTV cameras in the ATM booths or capturing tellers as they serve their customers are working properly. Some banks absolve themselves from blame whenever a customer loses money on the digital platforms claiming the customer must have given their password to the fraudsters and the story ends at that.

In some banks, whenever one deposits a substantial amount of money, they start receiving calls from fraudsters claiming to be calling from the bank regarding a problem with their password or ID. How do these fraudsters know that funds have hit the accounts?

Lest we forget, the major reason for the enactment of the interest rate capping law in Kenya in 2012 was the greed exhibited by some banks that saw them hike rates to unpalatable levels. While banks competed on who would report the highest profit growth many Kenyans were left heaving under the burdens huge debts. Many businesses closed and bad loans in the banking sector soared.

Perhaps I should ask; why are Kenyan banks still not charging their customers rates based on their risk profile? The initial purpose of Credit Information Sharing (CIS) for banks, that commenced in 2010 was to improve collections. Because customers fear being listed, they are more amenable to honoring their payment obligation on time. Indeed this has helped improve collections for banks.

But what has it done for customers? Kenyan banks have been providing full file information on their borrowing customers to the credit bureaus for four years now so there is enough data to tack customer risk profiles but the sector is not using this information to price customer loans. In fact bureaus now provide banks with a PPI (Payment Performance Index) score. The banks however prefer to solely look at whether one is listed or not when appraising loan applications.

The Central Bank of Kenya, the regulator, previously argued that the rating system in Kenya is not yet mature, but that was four years ago.

The repeal of the three year law capping interest rates in November last year, came as a big relief to the banking sector and the economy as a whole. However, it is imperative that we ensure we never go back there. The CBK has been quite categorical on banks keeping interest rates low, in fact although the capping law is gone, the CBK has prevailed upon banks that attempt to increase their rates to rescind their decision.

Through the Banking Sector Charter (BSC), the CBK hopes to reign in banks and get them to be more transparent in their operations and services, have fair pricing for all their products, handle customer complaints more appropriately, impart financial knowledge to their customers and most importantly, ensure a risk based pricing model is established before banks start exercising their rights to price in the new regime.

The BSC is a noble instrument that should make banking in Kenya more responsible when fully implemented.


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