Living the Little Dream[26] – Kenyan Banking Challenge

“Hi Ms Queenie Chow, my name is XX and I am calling you to confirm your transaction.”
“Ok, what is this about exactly?” I questioned the caller.
“So, would 96 be good for you?” he answered.
“Hmm, can I say “no” to that? What’s going on?” I queried again.
“What about 97.7 then?” he continued on with his script.
“I guess so…but what is this?” I am still feeling confused.
“That’s fine, we will action this transfer for you then. Thank you for your time.” He quickly hung up.

The above was a phone conversation which I had with a customer service agent from an international bank which I hold a bank account with. Several minutes after the call, I came to realize that the caller was “negotiating” a currency exchange rate with me on a 5-digits USD transfer which I have wired into Kenya from abroad. I immediately called up another local Kenyan bank and they offered me an exchange rate of 113 KES to 1 USD (as opposed to 97.7). Of course, after spending great effort and negotiation skills, I ultimately had my bank reverse this transaction and received a slightly better exchange rate on this transaction at 101.5 KES per 1 USD.

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It is known that overseas bank transfers are often associated with a substantial fee and an exchange rate offered less than those of money transfer operators. Yet, I have never heard that as a customer’s money has landed in a bank that they need to “negotiate” with the bank on an appropriate exchange rate. Such “negotiation” almost seems useless to me as the customer has no option but accept the exchange rate given by the banker unless the transaction was to be reversed, in such case will incur high transaction cost. After-all, what bargaining power does the customer have? Furthermore, by simply engaging to bargain with the bank, I had received almost a 6% increase in this transaction. Customers who have not checked against the exchange rates to “negotiate” with the bank will simply suffer a big price for their ignorance. It was simply shocking that my bank – one with great international reputation – would attempt to make currency profits through obscure pricing and fee structure without simple security identification process. It is of no surprise that the chairman of Central Bank of Kenya, Mohammed Nyaoga recently warned the public that “a number of consumer protection concerns have emerged, including the lack of safeguards for funds held by non-prudentially regulated providers, limited disclosure of fees, terms and conditions”. Previous reports released by Ernst & Young also showed that more than half of the customers in Kenya reported a bad experience when transacting, compared to a third of bank customers globally.

“Consumer protection is striving towards making the consumer a king”. In an era of free competitions, it appears that the Kenyan banking industry must further ground in consumer protection measures in order to retain customers. In a developing market like Kenya, to make any impact at the base of the pyramid – making finance inclusive for low-income consumers –adequate consumer protection is absolutely necessary in building a trusting relationship between institutions and customers.