Regulation, inefficiency, lack of expertise are hurdles for banks
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By Princewill Udom
Customers and clients are the mainstay of the Korean banks. This means that there is a direct correlation between the performance of the banks and the confidence of the users in the banks.
Sadly, there is a crisis of confidence between the banks and the people whom they serve. The bond of trust between the banks and their customers is apparently weakening and this scenario may become pervasive.
The users’ waning enthusiasm for the banks may indicate the need for a new model of banking practices. The evidence of sagging confidence in the banks includes growing wariness by both the banks and their users, looming economic downturn and possible political fallouts.
To be sure, it would be unfair and misguided to attribute culpability to the banks only, albeit the banks have a critical role to play. This essay identifies three important instruments available for use by the banks to reinvent themselves. These are banking regulations, efficiency gains and specialization.
Firstly, the proliferation of banking regulations, although enacted in good faith, is probably hurting the prospects of the Korean banks. Some of the regulations appear to be counter-productive, succeeding only in placing a wedge between the banks and their customers. Some of the regulations are difficult to enforce, stall financial innovation and stymie performance.
In the light of this challenge therefore, the banks’ responsibility is to urge the regulators that a change of approach is an imperative for restoring the competitive edge of the banks. While not calling for a complete dismantling of the statutory banking infrastructure nor advocating a license for financial malpractices, an astute combination of a plausible legal framework and a principles-based approach is an essential requirement for the success of modern banks.
In some respects, a principles-based approach has the potential of delivering a significantly improved banking performance in comparison with a stringent statutory approach. The values upon which early banks operated such as trust, respect and accountability are still vital in assuring the users of the banks of the safety of their investments and the discipline of the bankers.
Secondly, the mother of inefficiency is undue, unwieldy and wilful bureaucracy, from which customers’ reservations about the banks emanate. For example, bureaucracy in the banks limits opportunities for customers especially in terms of inter-country payments involving different currencies.
This translates into higher costs and delays for the customers. The banks can address this situation by implementing cost-effective and time-efficient payment solutions across their operations.
Generally, banks need to learn to pare down the layers of inefficiencies which impede their ability to discharge their functions smoothly. Efficiency brings gains in quality and quantity of output.
Thirdly, the bounds of expertise are limitless, particularly in banking. Banking expertise is indispensable because it differentiates one bank from another, consolidates customers’ confidence, gives the bank a competitive advantage, leads to the provision of excellent financial products and services, and lowers costs for customers and clients.
Given these benefits, the acquisition of valuable proficiencies in banking is more than a necessity, which requires money, training and people. Excellence in banking is the culmination of continuous training, recruitment of the best and the brightest people, dispensing with dysfunctional and arcane methods of providing banking services, institutionalization of a learning culture within the organization, pioneering advances in the niche for which it is famed, and finding new and better ways of providing old services.
The training should span technical banking operations, cutting-edge financial services and products, training in foreign languages (especially English), and staff attitude to work and customers. Expertise can also be augmented by poaching foreigners with exceptional skills in specialist banking operations. A learning bank is a leading bank.
Princewill Udom is a senior at Management Development Institute, Nigeria, where he major in Economics and Management.