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Luis Riestra, CEO of Wise & Wealthy, holds up an ATM card in his office in Gangnam, southern Seoul. |
Recent anger in the foreign community about banking services has sparked heated debate. In this first part of a two article series, Luis Riestra, founder and CEO of Wise and Wealthy, a foreign company headquartered in Korea, attempts to answer these questions: What is happening? Who is confused? Why are these people not being treated nicely? Who is at fault? What can be done about it today? ― ED.
By Luis Riestra
CEO of Wise and Wealthy
The reasons you hear so many complaints in English papers and blogs is not surprising: the lack of English language skills at the branch-teller level; the lack of knowledge of banks on the market size of the English-speaking population; unfounded stereotypes based on isolated cases that couldn't be any more irrelevant to banking. All these combine against this sub-segment.
It is though very important to uncover some of the myths that have poisoned both sides of the equation: the banks and the customers. To understand the system, you need to begin by knowing that there are three parties to it: The bank and everything that happens behind the scenes; the customer that is not fully informed; and the interface, that layer or screen through which each party interacts and communicates, made up basically of ATMs (automatic teller machines or commonly known as cash machines), Internet banking web sites and branch staff.
Common Misconceptions by Banks
Myth: Foreigners leave the country without paying debts
Fact: Not a single bank I have worked with or come to know (or other entities such as telecom companies for that matter) in Korea has accumulated enough statistical evidence to back such a poorly-thought-out and discriminatory misconception, which is solely based on stereotypes and a failure to understand the market and its potential.
Myth: Foreigners are a high risk population to extend credit to ― be it credit cards, mortgages or cash-flow loans.
Fact: According to last year's figures from the immigration office online, nearly 75 percent of the 1 million foreigners in Korea are working and earning income. The rest is made up largely of international students; those on various short-term assignments; tourists; and dependents of those who work here. This is a very large percentage by comparison to say the number of Koreans you'll find in some other countries, which make up a mix of mostly international students and intra-company transferees.
A Korean working back in my country will have no difficulty obtaining a credit card and an international ATM as long as the person has the right visa, a job and proof of income. The visa comes with the job.
Whether this person is teaching English to Korean kids in an institute say in Vancouver, part-timing at a dry cleaner's or heading a Korean chaebol's branch out-there, that becomes irrelevant to being approved a basic credit card and an international ATM card.
Myth: Foreigners have difficult requests to make at the branch
Fact: The average teller at just about any Korean bank has been trained to offer a range of financial solutions to the Korean customer.
The bulk of operations requested by foreigners are: opening accounts; exchanging currency; transferring cash overseas; applying for credit cards; applying for internet banking access; and requesting information on the most common types of loans (note that three of these transactions are one-time-only deals).
So far, studies we have conducted at Wise & Wealthy have revealed that just about half of foreigners first choice is to a branch to learn how to obtain these services. The other half would prefer to get the information online if foreign language internet banking systems weren't so difficult to log onto and operate, which is largely due to anti-hacking programs that keep both fraudsters and customers alike out of the system.
Many internet banking systems in Korea will actually impose up to six layers of security before a user can make a transaction, with all its IT problems in-between ― more often than not freezing up your computer. The principle is simple: ``If we can keep everyone out of the system, fraudsters won't get in''…. that is the bottom line on cyber-safety. IT-related failures cram front-line tellers with customer complaints they don't have the training to deal with.
Myth: English teachers are bad bank customers (bad as in not worth the bank's effort)
Fact: Despite accounting for nearly 5 percent of the population that has work visas and is not part of the South-East Asian and Korean-Chinese group, English teachers earn at minimum 2 million won a month for first year assignments, with the larger portion of this being residual. Often they have no rent to pay and use this for living and remitting what is left over back home.
By comparison on customer risk management, a Korean university student will have a credit card even with a small limit based on part time jobs income. Given the well-developed and easily accessible credit card market and programs in Korea, English teachers stand as yet the most ignored blue ocean sub-segment among foreigners.
A larger crowd of corporate fellows with higher incomes and more complex financial needs are mostly well-taken care of by foreign banks, with a few using to some extent Korean banks.
Others simply won't use Korean banks at all, as they do not provide and often simply don't want to bother with services for foreign clients, or because they get most of their financial needs sorted out in their home countries. All these facts translate into wasted opportunities for local banks.
Misunderstandings
Myth: International ATM cards cannot be issued to foreigners.
Fact: Yes, they can but banks have taken the easy approach of not doing so and made up unfounded explanations for angry customers.
The most common answer you'll hear at banks is that this regulation prevents people from going over their $10,000 Korean-won equivalent allowance per annum on remittances, which is a fairly lame way to frame the truth: laziness to understand and service a smaller yet worthy-of-service market.
The fact of blocking this access to the English speaker is much easier than to endeavor to introduce a better service for everyone ― and again, lack of fact-gathering on how large and profitable this population can be for the financial services sector shows the marginal level of concern at banks.
My answers to tellers who have told me off with this one has been that Korean friends and spouses willing to lend me money for this purpose, and the actual ability to change my cash at the branch before I go on a trip, both rule out any sense to this regulation.
Moreover, all foreigners working in Korea get this $10,000 Korean-won equivalent allowance on remittances, no-questions-asked, or can remit up to 100 percent of their annual legally-earned income with proof from employers on the amount.
This $10,000 Korean-won equivalent allowance is automatically renewed if you go abroad and come back (you might be asked for your passport to show you've been abroad based on airport stamps!). These facts show up the so-called regulation to be a poor excuse.
I do indeed suspect though, that both the losing out on exchange rate earnings earned by banks in other countries (as the other country's bank's ATM will charge their share of the transaction) and the exodus of what is otherwise sitting cash available to banks for their investments, might have something to do with this.
There is nothing to lose by blocking foreigners in a country where not a single entity from the government downwards monitors discriminatory practices actively, making foreigners an easy target for this ― so nobody has ever made enough noise to revert the process, till now.
End of part one. To be continued next week
The Korea Exchange Bank has commissioned the company Wise & Weathy to do market research, part of which takes the form of the Foreigners' Retail Banking Survey, which is easily accessible through www.korea4expats.com. You can submit as much information as you can and leave an email address (optional) if you wish to obtain a USB memory as a gift (limited quantities).
The main purpose of the survey is to obtain a more clear understanding of banking needs, difficulties, complaints and suggestions of foreigners, but with an emphasis on the English speaking community, whether native speakers or those who use English as their main means of communication here.
Wise & Wealthy CEO Luis Riestra in 2005 turned his KDI-school-earned master's degree on foreign investment into a business much to do with foreign business policy and practices of Korea and its global interactions and competitiveness. He can be reached at mfdiluis@consultant.com or at the company's web site, www.bewiseandwealthy.com.
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