Customer Satisfaction lower in metros

Recently, McKinsey & Co. released a study on the Indian Banking System. According to the study, the IT effectiveness of some leading Indian banks is better than that of banks abroad.

The study also finds the level of customer satisfaction in Indian metros is lower than that in rest of Asia. Banks' IT infrastructure in the past year has been focused on implementing Know Your Customer (KYC) as per Basel II guidelines. So does the 'effective IT infrastructure' fall back on satisfying Indian customers? Or do Indians (in the metros) demand 'something more' out of banks that the banks aren't (yet) able to deliver?

Is Insurance a Savings Instrument?

An increase in the disposable income of Indians has led to an upswing in the lifestyle of people. A growing need for insurance has also been observed, as more families are dependent on only one earning member.

There are two types of life insurance - term plans, which are the simplest and cheapest form of risk cover, and savings based plans, where one can expect returns after a period. The number of savings based plans have recently been on the increase.

People are viewing it as an investment instrument; like market-based Unit Linked Insurance Plans (ULIP) as equivalent to another Mutual Fund. But it is not entirely their fault. Insurance Advisers are 'misguiding' them into buying these savings based plans as investments with an added benefit of risk cover, instead of the other way round.

However, consumers need to keep in mind that most of these plans are beneficial (both risk-cover as well as returns wise) only in the long term, though most insurance agents push them as only a 'three-year' investment. Incidentally, neither ULIPs nor Mutual Funds 'guarantee' returns.

An ideal way of insuring, as most financial planners would put it, would be to buy simple term plans for life risk cover and diversified investment of the rest of the savings in other instruments like mutual funds, public provident funds, and bank deposits.

Do Call Up Registry?

The RBI made guidelines addressed to all Scheduled Commercial Banks/NBFCs who involved in DSAs/DMAs for telemarketing back in July 2006. The Telecom Regulatory Authority of India (TRAI) later set-up a dedicated site effective September 2007.

'An amount of Rs. 500/- per call/message has been prescribed to discourage telemarketers who make calls to numbers registered in Do Not Call list. The defaulter telemarketer will face disconnection of telecom service' says an excerpt from the National Do Not Call Registry site. The site also disclaimed that it'll take at least four weeks until the system is effective.

Within a few days, hordes of people got their numbers registered on the list. Two months down the line, these people did get sales calls. Clearly, the 'movement' has no effect on the end user, who still continues to get calls from people trying to sell loans and insurance policies. The system is designed in such a way that it is difficult for the end-user to take action against these pestering calls. The consumer has to first inform his telecom service provider, who would then forward a detailed complaint to TRAI. And it is not too difficult to think how quickly one gets connected to the telecom provider's helpline, especially cellular ones.

Instead, would a reverse approach work - that people would register themselves on a 'Do Call Up' register. And what would drive people to get themselves on this list? The incentive is for the marketers to decide. Like getting paid for receiving 'unsolicited calls'?

'Regulation' of Bank Charges

People hear (and have even experienced) several instances where they find some deductions in their bank account statements. And they are usually not intimated before the bank charges them.

Also, the fees for various banks quite differ from one another. The Reserve Bank receives lot of complaints from consumers about these charges being too high. The RBI, in this regard, had made a scheme for ensuring reasonableness of the bank charges in May 2006. This scheme is called the "Fair Practices Code: Reasonableness of Bank Charges" which made it necessary to maintain transparency in charges and fees. Apparently, banks are supposed to explain the why the charged amounts (from a list of service charges) are reasonable. The complete list of banks and their service fees are available at the Service Charge of Banks page on RBI's website.

Nevertheless, some issues still remain. Like asking for a monthly statement - isn't it the right of a not-so-net-savvy customer to know his months transactions (for free)? Also, in the case when a cheque gets bounced, the both the participating banks charge the account holders in question. In this case, should the cheque-depositor be also charged?

Who's guarding your ATM?

ATMs are now the most used touch-point between the bank and the customer. The security measures at an ATM are far lesser than that found at a bank branch. ATMs are equipped with either a camera or a watchman, and rarely both, let alone any additional measures. This brings us to the question, that as an individual, is transacting at ATMs really secure?

Complex frauds like card swapping and card jamming are unheard of in India. The first few things that come to the mind on ATM frauds are card theft, PIN theft and mugging.

Unlike in case of credit cards, ATMs need a two factor authentication (1: the card, and 2: the PIN or any biometric identification) to operate. A two factor authentication is necessary for added security. PIN thefts are formed mostly out of customers casually disclosing the said code to, say, drivers or relatives to withdraw money for them. The bank pretty much cannot control these factors - these are left for the consumer to handle. Banknet's Report on the Indian ATM Industry has mentioned a few tips on how to prevent such frauds and other precautionary measures to be taken while at an ATM.

Still, robbing or mugging leaves some fraud issues unanswered. Hiring guards has been generating controversy. It is observed that customers usually ask these guards for assistance in case they face any problems. This tempts banks to train these guards to help such customers in need. However RBI feels that these 'self-service' terminals should not involve assistance from any such 'third parties' who may themselves stand as potential threats to customer safety.

Tell us what you think. Do we need guards at ATMs? If not, what should be the solution?

Soft Recovery Agents - A Matter of Ethics?

We all know that banks hire recovery agents to, well, recover outstanding dues from customers. However, the term 'recovery agents' did not take much time to become synonymous with 'goons'. The people hired by these banks and credit companies often threaten the customer into paying up money. They do not seem to be trained to work as per their hiring company's image. It is not hard to guess that these are third-party contractors and banks wouldn't care to spend on training, as long as the system gives results.

Sure, banks have given loans to people, and they do have the right to recover them. But it does not mean they can threaten and abuse their clients.

The Reserve Bank of India had to step in to control these unethical practices. Following a consideration of a ban on recovery agents (if found using abusive language) by the RBI, banks are taking other routes (read: other routes to hire recovery agents, not other routes for recovery). State Bank of India, for starts, is looking for 'soft' recovery agents, whose job profiles wouldn't include threats and abusive language. They claim to they would train them to also handle other paper-work required at the customer end.

So following their prior abuses, will the customers now co-operate? Will the recovery be effective? Or is it just another marketing gimmick?
Submit your views.

mBanking Revisited

Mobile Banking, a facility being provided by many banks in India, is not entirely a new concept. But the scope of this service is now expanding. It is now not just restricted to checking your balance or mini-statements on your mobile screen.

The great penetration of this medium in India has the potential to effectively tap the unbanked people. As mobile-based applications expand from GPRS based services to Bluetooth enabled ones, these are not feasible for banking purposes - most of these people in question are not equipped with technology-enabled (read:expensive) handsets. Banks need to, therefore, focus on technology restricted to the ones available on plain-vanilla handsets, viz. SMS.

Going a step further, some companies introduced Mobile Payments in India. However, these were only linked with a Credit or Debit Card. The role of the phone was only restricted to acting as a second factor of Authentication, i.e. only to improve security while paying by cards.

But now it is possible to remit money via your mobile, with the launch of mobile version of VISA Money Transfer. Several such peer-to-peer (P2P) remittance services have successfully entered in some of the foreign markets.

RBI is working on a guideline for enabling the service for banks in India. Once banks get the green signal, it is set to change the face of the Banking Industry.

Smart Cards, Stupid Spends

How many times do we over-spend our credit cards? Nearly everyone has had an experience with that. The number of 'reckless' spends are are no less either. Ever swiped the plastic and ended up paying up within just eight days for that special gift you bought for your mother? Which is why, here's a primer on 'How to use that piece of plastic wisely so that I don't end up in a mess'.

I won't be discussing on capturing these companies' latest offers to the fullest, nor about stupid cash-back offers, but really how the whole system works - You see, a background of it all would give us a fair idea of what separates the we-know-we-have-spent and what-the-credit-companies-think-we-have-spent. I shall talk about the bare essentials that you need to know, without straining your eyes scrolling through the whole gamut of fine print on the forms that you signed months ago.

Sure, credit cards give us a fair reason to use them - they're accepted at most merchant outlets, give us freedom from carrying loads of cash, and mini-loans virtually available to us at any time are always welcome.

However, there's a fine print to it. ALL of these cards come with a credit period and a credit limit. Isn't too hard to guess what these are. But from the company's point-of-view, these are interpreted slightly differently. They claim their credit limit is of 45 days. But wait. Their systems are fully computerised. No matter how well a computer could fly and land an aeroplane without human interference, for credit companies, they're inherently dumb. They're deliberately kept dumb (is that to exploit us consumers? Dunno). The billing cycles of credit companies are fixed. Which is why the credit period that we get is (usually) calculated from the 1st of every month. This is what separates automated systems from the human way of thinking.

Come to think of the gift example above, didn't you buy that gift on the 29th of the month? And then guessing that the period that you'll get is supposedly the 14th day, two months hence? Hey! Its in this month's bill! Where is my credit period? You said 45 days, innit?

Well, then lets get things straight. We'll start from the company's view: You buy something on the 2nd day of the month. The company wouldn't print the bill until the 30th. That gives you a fair credit period of 28 days. On this bill, it is mentioned that the due date for payment is the 15th of the next month. Add 15 days to your credit period. You pay by cheque, which the bank takes two days for 'debiting your account'. Now add 'em up: 28+15+2 = Voila!

So on a time line, this edge-to-edge calculation will let you enjoy the actual credit period. Feel cheated? Well, that's the way it works, especially when you don't want to squint for the fine print. Now its time to turn the tables. Go ahead and buy your stuff in the first week - to enjoy their full free credit period. Reduce your burdens and get-it-all.

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