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Banking: Seeking Convenience

Nearly ten years ago, banks in China were not as involved in the daily lives of ordinary people as they are now. In most cases, a person went into a bank simply to save or withdraw money. If a long queue happened to show up in front of a bank, it was very likely because people were waiting to buy State bonds, which paid a slightly more attractive interest rate.

But with bank reforms in the late 1990s, Chinese banks began to engage in more business undertakings. At today’s banks people can collect salaries, apply for credit cards and pay ordinary electricity, water and natural gas bills. If you own a car, you will likely pay your tariffs and traffic fines at a bank counter. Recently, many people have begun crowding into banks to buy different kinds of stock-pegged funds to take advantage of China’s sometimes mercurial, yet bullish stock market, which has miraculously recovered from its long-term bearishness since late in 2006.

Long queues are again common at banks before they open, and inside after they do, but now this is a sign of the banks’ rapidly expanding scale of business and larger clientele. Even though most banks try to maintain order by giving visitors sequence numbers according to their arrival times, patience is tested and tempers sometimes flare because of waiting times, making the bank lobbies anything but pleasing places. In one extreme case, an elderly woman reportedly fainted while in line.

Under such circumstances Chinese banks, especially huge State-owned firms, have come under fire resulting from public dissatisfaction. People complain that the banks have become less responsive in coping with the rapid increase in personal financial transactions. Bank counters are often insufficiently staffed to handle customer loads, especially at peak hours, and the banks’ operating hours make it difficult for workers to access them, except during precious weekend off hours when the banks are jammed. Because of this, people cannot take full advantage of the new range of bank services; the banks lose business and their customers and potential customers go away unsatisfied.

A number of new banking services, perhaps ironically, are causing even more discontent, because with the new services comes a plethora of new fees. And even though banking regulators have abolished special fees for ATM (automatic-teller machine) withdrawals at competing banks, fees for any ATM withdrawal along with fees for minimal account totals are adding to the dissatisfaction.

Historical factors underlay much of the friction between the banks and their customers. Reform in China's financial sector encourages banks to seek greater profits and to reduce costs, but it will take time for the Chinese people to adjust to the new roles that banks play in their transformation from public-service bodies to commercial entities. Banks, too, need time to adjust to the expectations of their customers and to improve their business performances.

Regulatory authorities may have a role to play in reducing customer dissatisfaction, especially if banks are unwilling to address their customer service problems because of the perceived expense involved. Responding to the rising dissatisfaction, the People's Bank of China on May 20 announced new regulations and guidelines for commercial banks to follow. It urged commercial banks to simplify service procedures and to improve their inter-bank cooperation so that an account is recognized at any bank for purposes of paying public-service bills. It also said banks should increase their one-day total withdrawal limits at ATMs. But some assert that this makes the central bank seem more like an executive governor rather than a macrofinancial regulator.

Now, a new factor looms with the entry of foreign banks to the domestic banking market, something that may help improve the business environment and improve services to customers. Customers can now open renminbi accounts at foreign banks, apply for home loans and or obtain other personal financial products and services. Although the indigenous banks still hold the high ground over their foreign competitors with regard to network coverage and the range of financial products offered, they are not at all in an advantageous position when corporate credibility and their quality of management and services is taken into consideration. The home banks must  overcome negative perceptions: even some Chinese people who have never used a foreign bank still have high regard for them and highly value the foreign banks’ corporate image. Still, even the foreign banks pursue the upper strata of income earners in China, as it is believed they control most of the country’s social wealth. It is still too expensive for a person with an average income to have an account at a foreign bank.

Again, ironically, China’s smaller banks seem to be more responsive to their average customer’s growing needs, especially those surviving on non-State investment. These banks, though they have fewer branches and outlets than the country’s giants, are often more productive and more efficient than the big banks in whose shadows they reside, and they often provide better customer service and a more diverse range of products. Though long queues of people are also found at these banks too, order is much better kept, since the customers are more patiently served by the staff.

As one observer said, “It’s time for the large-size State banks to streamline their systems and improve their managerial styles and services so that their swanky lobbies are no longer crowded with sweating and annoyed customers.”