Regulations force banks to put you first

THERE has been a major shift among the major retail banks in adopting a more customer-centric culture and big improvements in how they treat and service you. However, the banks are still failing consumers through poor service from call centres and not doing more to assist those whose accounts have been hacked by fraudsters.

This was revealed in a press briefing this week by the Financial Sector Conduct Authority (FSCA), which only relatively recently has taken on the task of overseeing the market conduct of the banking sector.

The FSCA reported back on how banks were responding to new regulations imposed on them since the introduction in 2017 of the so-called “twin peaks” regulatory regime, under which their financial wellness is monitored by the Prudential Authority (within the South African Reserve Bank), but their market conduct now falls under the FSCA.

In July last year, in line with its mandate, the FSCA published the Conduct Standard for Banks, which laid out requirements concerning the treatment of customers and the marketing and distribution of banking products. This standard has been implemented piecemeal: sections 1 and 2, dealing with general obligations, were implemented immediately in July last year; sections 3 to 6, dealing with governance, the design and suitability of products and services, and the marketing of those products and services, were implemented on March 1 this year; and sections 7 to 10, dealing with disclosures, complaints, and the conditions under which a bank can refuse a client or terminate his or her bank account, among other things, will come into force in July.

The FSCA’s Kedibone Dikokwe, divisional executive responsible for conduct of business supervision, and Sindiswa Makhubalo, head of bank and payment provider supervision, reported on progress thus far, explaining what was working well, as well as areas of concern.

WHAT’S WORKING WELL

Dikokwe said there had been a genuine effort by most banks to put market conduct at the centre of their business culture, rather than merely adopting a “tick-box” compliance approach: about 89% of the banks had succeeded in inculcating the market conduct culture within the organisation.

“Almost all the banks that we have engaged with thus far understand what market conduct entails. However, in relation to complying with the effective sections of the conduct standards, looking at both the local and branches of foreign banks, approximately 70% are about 85% compliant,” Dikokwe and Makhubalo said in their presentation.

Areas of improvement were:

Efforts to reduce fees, or at least not raise them in the 2021/22 financial year.

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Welcome signs of a reduction of premiums on credit life insurance, an area of concern for the FSCA, where premiums had been unrealistically high for the benefits offered.

A drastic decrease in fraudulent debit orders, which has been helped by the implementation of the Debicheck

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IOL.CO.ZA protection system.

The retraction of misleading advertising and early signs of a more responsible approach to marketing. In many cases of misleading advertising, Makhubalo said, it was an issue of the campaign not disclosing all the conditions – in one instance, a bank retracted a campaign offering “free” banking when, in fact, there were underlying costs to the consumer.

Improved complaints management and resolution processes.

A move to keep customers abreast of technological advances and to embrace customers who are not tech-savvy or who do not have access to smart devices.

The establishment of dedicated

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◆ market-conduct governance structures and committees to ensure that the customer’s voice is taken into account when formulating business strategies.

GAPS IDENTIFIED

Dikokwe and Makhubalo also reported on areas where banks are not serving customers as they should. These included:

The termination of accounts without a proper engagement process (the sections of the conduct standard being implemented in July require your bank to give full reasons why an account is terminated).

An increase in bank fraud where customers fall victim to phishing and other practices, and minimal assistance from banks to help the customer retrieve his or her funds. Dikokwe said banks have a bigger role to play in freezing the account before the fraud is perpetrated.

“Examples we’ve seen are that, because the banks are moving too slowly, the fraudsters are able to transfer the money before the account is frozen,” she said.

Some digitisation strategies are leaving customers behind. Customers “must be taken on the journey, even those in deepest rural areas”.

An increase in digital platform downtime.

Inconsistency in fees for instant electronic transfers.

Inconsistency in the management of dormant accounts.

Poor service from call centres, as well as at some branches (though this may be partly due to the pandemic).

On the FSCA’s part, it is using a “mystery shopper” strategy to identify problems consumers have when dealing with banks. It has also identified the need for banks to deal with unclaimed funds in dormant accounts that have a positive balance.

If banks doggedly fail to comply with the conduct standards, the FSCA has power to issue penalties, take action against directors, and even have a bank’s licence revoked.

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