The FINANCIAL — In the last week the financial market seems to have suddenly woken up. Banks have started aggressive marketing campaigns whereby they are calling others’ customers and offering them better conditions than their rivals.
One of these is BasisBank, local bank co-owned by EBRD. Corporative sales agents were calling the clients of rival banks offering them “better conditions”. Because of this the issue of rules and fair play in the banking sector has been raised again. But it is also a positive signal, experts believe. The FINANCIAL reveals both the positive and the negative of the past week.
It is definitely a negative that someone knows where you keep your money and which bank serves you. But is this only happening in Georgia?
“Culture and professional ethics go deeper than legislation”, this well known formula of Swiss banks is being tested by the Government of the US when Switzerland agreed to share information about “doubtful” clients. The deal, however, could still be derailed in Switzerland, where it must gain the backing of parliament and could become the subject of a referendum, so the Wall Street Journal reported.
Switzerland has said it won't undermine the confidentiality of Swiss financial institutions.
According to the Swiss Bankers Association, bank-client confidentiality protects privacy in accordance with the constitution and laws of Switzerland. However, this does not cover abuses, particularly of a criminal nature. Bank-client confidentiality has always been waived for criminal investigators, to whom banks are required to pass client information.
“Information, about whose client is this or that company or individual, is not public. Still it can be easily accessible in Georgia,” Zurab Gvasalia, President of the Association of Banks of Georgia (ABG), told The FINANCIAL.
“Actually manners of acting between banks are not regulated by law. Even if it were so, it would not be correct. As for the code of ethics, this is a very difficult subject and needs lots of work and attention. Even if banks would use non ethical ways to attract customers, they could not manage to do it. We had cases when banks offered loans to clients to such an amount and for the purpose of covering a loan in another bank. There is nothing non ethical about this practice,” Gvasalia says.
“The recent activity of BasisBank is welcome in some ways, but the most important question is how did the Bank receive information about whose clients certain individuals or organizations are, because such information is not public,” says Vakhtang Berishvili, Associate Professor of Management and International Studies of Caucasus School of Business (CSB).
“We never disclose any information about our clients without their consent,” Sophio Balavadze, Corporate Communications and PR Manager of Bank of Georgia, one of the leading Georgian banks, declares.
Berishvili says that against the background of the current recession the aggressive activity of some banks is more important because even minimal privileges on terms or interest rates can help to assimilate customers. “If people before the crisis did not take into account a difference of 0.5%, now they will paying attention to it. If banks are focused on keeping customers, they need to offer some privileges, otherwise customers will move to another bank,” he says.
“Previously BasisBank was focused on a specific niche of the market. Currently they have started unifying their segment. Mostly the customers of BasisBank were representatives of politicians and people close to the Government. For the reason of expected current political changes the management of BasisBank decided to become more universal. As a reason of BasisBank’s activation we can conclude that they determined their own risks and are trying to minimize them,” Berishvili notes.
Balavadze, Bank of Georgia, says that “Small organizations always have the chance to compete for clients; they can choose and target a specific niche on the market”.
“A loss of customers will be inevitable for banks if they do not satisfy customers’ demands,” Berishvili warns. In terms of the market, the activity of banks will benefit it. He welcomes the tendency of activation of small or middle sized banks, especially if they will start to be able to support their customers financially.
Berishvili divides customers in to two categories. “The one kind will easily switch banks if another offers better conditions. Others regard banks as their partners and are therefore loyal to them. The first category will change bank for the difference of even GEL 1. During the crisis this GEL 1 has decisive meaning.
“At TBC there are more conservative customers. As for Bank of Georgia, they have a number of new clients that can be considered less conservative,” he notes.
“When a bank starts the introduction of new products it always tries to create a better product than its competitors to attract more customers,” Gvasalia, ABG, declares.
“Several years ago local Georgian banks had only some kinds of products and were limiting their services because of this. Since then Bank of Georgia started its aggressive policy of development. They created new products and started actively winning customers over from their neighbour banks. The representatives of Bank of Georgia were spending whole days in the offices of organizations,” Berishvili recalls.
He says that Bank of Georgia started developing new products which were highly suited to the demands of customers. Finally Bank of Georgia managed to attract a large number of customers. The policy of Bank of Georgia stimulated others to start developing new products. As a result of the active work of Bank of Georgia, the local market received a wide range of products and huge competition. So the activities of Bank of Georgia during the last few years have been very useful for others.
Gvasalia underlines the main advantage of competition between banks. He says that as a result of it, the level of service will be improved. “If the others don’t follow soon then they will remain behind and at a disadvantage.
“To win over new customers the best way is better conditions, credit terms, and interest rates on deposits. It is much more important for clients to have guarantees that in case of need banks will support their business and finance them. Everything needs creative approaches. Most of the banks have special groups for this. One who’ll be better prepared and will be financially stronger will be in a better position. Active work will always yield results if it is used correctly,” Gvasalia notes.
Berishvili declares that currently many clients are paying much attention to interest rates, but this is not significant.
“What’s more important is guarantees, that the banks will give a useful amount to the customers in case of need. Another issue is the flexibility of banks. What kind of privileges will the bank offer me if I suddenly get in to trouble. Will they postpone the date of covering interest rates, or not. There was a case in one of the Georgian banks when a client was assured receiving a useful amount whenever he liked but they did not keep their promise,” he says.
“Bank of Georgia had always been a customer oriented bank. We constantly ensure that our clients always get the best terms. The most important conditions are reliability and quality of service,” says Balavadze, Bank of Georgia.
“We should not expect that after the end of this aggressive policy BasisBank will become large scale at once, like TBC Bank, Bank Republic or Bank of Georgia. Presently they do not have useful enough resources. But if BasisBank will increase its scale soon, then it will get the opportunity to maintain it in the future. If any of the banks have useful resources, then the current situation is the right time for them to be used. After the end of the recession banks will not start working on re-attracting lost customers immediately,” Berishvili says.
Lull before the storm
After a long delay of activity KorStandard Bank has renewed its marketing campaign. “The activation of Standard Bank is natural. They kept silent for a long time,” Berishvili says. Thus it seems that banks are finally waking up in Georgia.
Written By Madona Gasanova
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