Monday, April 23, 2012

The Love of Your Own Kind!

Since I collected payment from my first decent sized job for the year, I decided that it was time to start saving again. Two dry years and the absence of a retainer client made savings all the more important. So, I decided to take a tenth of what I made and split the savings between my Central Provident Fund (CPF – a compulsory saving scheme for all Singaporeans) and my Standard Chartered Account.

Discovering Standard Chartered again was a wonderful joy that put one of the biggest “hot-button” issues into perspective – that it the issue of foreigners.

Despite having no presence in the UK, Standard Chartered is a British Bank, which is listed on the London Stock Exchange. The bank, along with the Hong Kong Shanghai Banking Corporation (HSBC) was a bastion of British Commercial Dominance in the colonies. Standard Chartered, along with HSBC remains the only commercial banks in the Western World that issues currency (Hong Kong Dollar, the other to issue Hong Kong Dollars is the Bank of China) and its presence in emerging markets has helped Standard Chartered remain fairly strong despite the financial crisis (American Express Banks was bought by Standard Chartered).

I became a Standard Chartered customer in 2005, when I started writing for Arab News. The Arabs paid me with a cheque that was to be drawn on a Standard Chartered Bank account. At the time, the account they had on offer paid me a grand total of 1.88 percent (which may not sound like much but in Singapore its considered a lottery to get this type of interest on a savings account) and I could run the account with something as little as a single dollar.

In 2006, when I was doing relatively well, thanks to the Saudi Embassy in Singapore, I used this account as a place to park my savings. Unfortunately, I lost focus and allowed myself to whittle down my cash savings to a non-existent level and sometime in 2010; they sent me a note asking me to put something into the account to keep it going. I put five dollars into the account in November, 2010 and left it there.

So, when I visited them last week, I decided to find out how the account was doing. I was told that in the year my five bucks had lain in the account, untouched, I had earned a grand total of a cent in interest payments. OK, this doesn’t sound like a lot of money.

However, the comparison with how I would be treated at my regular bank, the Development Bank of Singapore or DBS was quite astounding.

Let’s start with the amount. Standard Chartered allowed me to keep my account open with a mere five dollars. Had I put this amount in an account with DBS, I would have received a few more nasty notes through the course of the year to remind me to put more money into the account because they would have shut me down. DBS has a policy of charging the customer a fee of two dollars a month for having less than $500 in your savings account. If you have the misfortune of having a current account with them, they’ll charge you a mere $15 for having a balance of less than $10,000 a month.

The argument here is that DBS loses money to maintain accounts with not very much money in them and so they need to pass the losses onto the consumer.

For some reason, the government thinks this is acceptable. Like all banks, DBS borrows money from depositors at a low level of interest and proceeds to lend it out at a higher rate. To anyone outside Singapore, it looks like DBS has a fool proof way of printing money. I get paid some 0.05 percent per annum on my savings account and I get NO interest on my corporate account. The bank then lends out the money I deposit into the accounts at anything ranging from six to 20 percent per annum.

The non-existent interest rates I’m paid for lending money to the bank would not be so bad on its own. However, insult is added to injury when the bank charges are thrown into the equation. I effectively pay the bank for the privilege of lending them money I earn.

My treatment at Standard Chartered and my comparative treatment at DBS is not a question of who would have paid me more. I made one cent out of Standard Chartered and had I kept an account with DBS with five dollars, I would end up owing them money.

The question here is, why do I have to pay DBS for the privilege of lending them money when Standard Chartered does not charge me for the privilege? It cannot be that Standard Chartered has found a way of not losing money on my account while DBS bleeds money every time I have less than $500 in my savings account?

Not everything about Standard Chartered is better than DBS. It’s cheaper to transfer money via DBS. When I first started out with Huong, I helped her to transfer money to Vietnam. Charges at DBS were only S$30 per transaction. By contrast, Standard Chartered charged $100 per transaction. The process at both banks takes about the same amount of paper work, yet one bank charged a premium of $70 extra per transaction.

That’s OK. In a world with free-competition, customers should be allowed to pick and choose which provider they want for various services. I would save with Standard Chartered and transfer money through DBS.

Unfortunately, the world of banking isn’t exactly “free-market” competition. Foreign banks like HSBC, Citi and Standard Chartered are allowed to operate in the local market provided they understand whose market it is. As such, foreign banks that deal with consumers tend to cater to only the very high-end ones and ignore the masses. They are limited in the number of branches they are allowed to operate. Back when I was an intern and Citibank was Citibank NA, rather than Citibank Pte Ltd, we had a grand total of three branches. By contrast, DBS, which is co-incidentally owned by Temasek Holdings, which is in turn owned by the Ministry of Finance, has a mere 100 plus branches across the island.

Yes, Citi, Standard Chartered, HSBC and gang have a larger international network than the local boys. However, within the domestic market, it’s the local boys who have the advantage. Every Singaporean with a savings account started out with a POSB (Post Office Savings Banks – a subsidiary of DBS) account. The local boys have had a head start on taking the local market and in a way; local people have their savings trapped in the local banks. Contrary to what the powers-that-be may tell you, Singapore’s prosperity isn’t built by foreigners pouring their money into the place, it’s built by trapping the savings of the locals and investing it elsewhere.

To be fair, the local banks have realized the importance of overseas growth markets and adapting to deal with them. United Overseas Bank (UOB) is a big player in Thailand. DBS is a big player in Hong Kong. The bank is actively modeling itself on one of the most successful international banks – Citibank. My ex-boss, Eddie Khoo, moved from Citi to DBS before heading to UOB where he runs consumer banking. More recently, DBS hired Piyush Gupta, a former Citibanker to be CEO.

Once they hit overseas markets, our local boys will have to learn to treat customers properly. However, will their love for their customers in say Hong Kong or Thailand translate into love or at least respect for the Singaporean customer?

As much as I would like it to be yes, I don’t think there’s a strong case for optimism. The big Singapore businesses that burnt overseas resort to milking more from their home base – the average Singapore consumer. Word has it that DBS was allowed to take over POSB when It started feeling the heat in the initial days of investing in China. When Temasek Holdings bought shares in the loss making Merrill Lynch, it quietly sold assets in Singapore.

A while back, I actually got into a heated debate with my favourite litigator and his partners. The crux of the argument was, one of their members had proposed that the government take a more active role in giving work to local law firms. I countered that patriotism has never been much of an effective marketing tool. Local consumers will chose price and quality over patriotism.

A year after this incident, I stick my position. As a local Singaporean business, I don’t expect the government to give me preferential treatment. What I do expect, is for the big local enterprises that I rely on like the banks to treat me like a valued customer rather than an automaton they can squeeze whenever they need to cover up for mistakes made elsewhere.

Let’s face it, after comparing the way I’ve been treated by Standard Chartered and the way I’ve been treated by DBS, I’m not thinking about Standard Chartered’s London Listing or Colonial heritage, I’m thinking of ways to move more of what little money I have their way because they give me so much more.

Extend that idea to other things. Why do we choose foreign things over local things? Could it be because the foreigners actually treat the locals with a bit more love and respect than the way we treat each other?

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