By Kim Tae-jong
Customer confidence in banking continues to fall here and a growing number of people are doing business with more than two banks, a survey revealed Thursday.
This clearly indicates that a series of recent scandals and reckless lending practices at major commercial banks as well as the suspension of savings banks have damaged the credibility of the banking sector.
According to the 2012 global consumer banking survey by Ernst & Young, 44 percent of Koreans said they lost trust in the industry after the eurozone financial crisis. The survey was conducted in June on about 28,000 banking customers across 35 countries.
It is higher than neighboring countries such as Japan and China, which stood at 28 percent and 30 percent, respectively, as well as higher than the average of the surveyed countries at 40 percent.
Local banks have been under fire in the past few months for alleged illegal activities.
The nation’s anti-trust watchdog has launched an investigation into nine commercial banks and 10 brokerage houses following allegations that they were engaged in collusion to set the three-month certification of deposit (CD) rates. These are applied to a wide range of financial transactions here, including loans to households and corporations.
Also, the Board of Audit and Inspection has found that some local banks cheated borrowers with discriminative policies concerning interest rates.
The London-based consulting firm also said the survey result shows that many Korean customers distrust their banks, and as a result, a number of clients are no longer loyal to just one bank with many respondents doing business with more than two banks.
About 37 percent of Korean customers said they had changed banks or had the intention to change them within a year.
The portion of people doing business with more than two banks stood at 89 percent, much higher than the global average of 59 percent.
Korean customers said the main reason for doing business with multiple banks was due to the availability of more favorable interest rates and lower transaction fees at different banks.
In comparison, respondents in other countries said they did business with more than two banks because of better products and services.
Regarding the different reasons, Ernst & Young said Korean customers are more sensitive to factors related to costs such as interest rates and transaction fees than people in other countries because there is little difference between the products and services offered by banks.
In the survey, Korean customers also put more weight on accessibility to branches than to automated teller machines, and had a stronger tendency to seek customized services and products than people in other countries.
“Banks should offer more options to meet fast-changing demands from individual customers,” said Kim Young-suk, director at Ernst & Young Korea. “They should strengthen reward programs for VIP customers and provide customers with more tailored services after analyzing their financial characteristics and demands in detail.”