THE IDEA of a ‘basic banking product’, inscribed into state regulations by the former government of Robert Fico, has failed to attract much attention from banking customers after being available for more than a month. Banks essentially say that the mandated product is unnecessary and poorly designed. As such, the stated aim of former finance minister Ján Počiatek – to 'heat up' competition in the market – appears not to have been realised. Most banks are offering the basic banking product, also known sometimes simply as the ‘package’, at monthly fees higher than those for their similar and more popular existing products.
The fate of the basic banking product in coming years is uncertain as the current parties of the ruling coalition, when in opposition, roundly criticised the idea and said it missed its target.
Banks reluctantly meet the obligation
Banks that were obliged to do so started offering the basic banking product as of October 1. The monthly service fees for the package range from €2.55 to over €8, based on a sample of the banks operating in Slovakia.
The low success of the package among Slovaks is blamed on its higher price in comparison with similar packages of services that are currently offered and promoted by the banks. Banks claim that the higher fees associated with the basic banking product are required due to the costs of the services that must be provided within the package.
“The price stems from the over-standard set-up of the package,” Marcel Laznia of the Slovak Banking Association (SBA) told The Slovak Spectator. “The state package contains services which are not a common part of standard products and simultaneously they rank among the most expensive, for instance, transactions with cash and transactions carried out in a bank’s branch office.”
Laznia does not see the main problem of this basic product either in its price or its content but rather in the fact that it was an ineffective approach to reaching the intended goals of the government: better access to one’s current account, making banks’ pricing policies more transparent, and increasing use of non-cash operations.
“The introduction of the basic banking product, which is upper-standard with regards to the needs of an average client – which is also thus more expensive – will not automatically increase the number of new clients who have not used bank services so far,” said Laznia, adding that with regards to making banks’ pricing policies more transparent such a product can be useful only when comparing one case, that is when the basic banking product fully meets the needs of a customer. “But because the needs of clients vary, one equal package cannot serve well for juxtaposition for most clients.”
The banking association also argues that the development of the basic banking product does not respond appropriately to the call for more non-cash transactions.
“This goal is not in line with the content of the [basic banking] product, which also contains cash operations carried out at a bank’s branch office,” said Laznia, who added that the goal of the SBA is to completely eliminate the obligation of banks to offer this product.
The position of the current Finance Ministry is as negative as the representatives of the ruling parties were when they were in opposition and criticising Počiatek’s ministry for its regulatory approach.
“The Finance Ministry does not consider the basic banking product to be an optimal instrument for protection of customers,” Martin Jaroš, the spokesperson of the Finance Ministry told The Slovak Spectator. “After the project is launched the ministry will analyse its results and will then decide about its future fate.”
In late August Hospodárske Noviny quoted former finance minister Počiatek as saying that if the banks sought to evade the basic banking product regulations, he would regard it as “boorishness” on their part. He added at that time that if the banks took evasive action, this would confirm to him that the regulatory approach had been right and should be extended.
Slovaks show no interest
“Clients do not show any interest in the basic banking product,” Štefan Frimmer, spokesperson for Slovakia’s biggest bank, Slovenská Sporiteľňa (SLSP), told The Slovak Spectator. The bank offers the basic package at a monthly fee of €7.90. “None of our clients have set up [this account] so far.”
Other banks said they have experienced identical or similar reactions among their customers.
“The idea itself on the launch of the basic banking product and its introduction into practice was at odds with a healthy competitive industry,” Boris Gandel, spokesperson of Tatra Banka, told The Slovak Spectator. The bank offers the basic package at €6 per month. He does not even see any possibility that this product in a modified form could be beneficial for the banking sector, saying that “regulation is never good for the market”.
Minister Počiatek’s good intentions?
The previous government instructed the banks to offer a ‘basic banking product’ – defined as a package of services which are identical across all banks – with the aim of helping customers achieve a better orientation towards the banking market and its fees, along with gaining smoother access to basic services associated with their regular bank account. Minister Počiatek said that such a product would target the ‘typical customer’ and that banks in their fight to attract these people would need to offer the most competitive prices.
Počiatek’s Finance Ministry issued its regulation on June 16 requiring banks to include within their basic banking product an unlimited number of payment transactions via internet banking, an unlimited number of transactions within the European Economic Area with payment cards, and three cash withdrawals from an ATM of the client’s bank per month, as well as one cash and three non-cash transactions at a branch office of the bank without any per transaction fees.
The commercial banks say this mandated product is useless and unnecessary.
“From our viewpoint the basic banking product is needless for our clients,” Frimmer of SLSP told The Slovak Spectator. “We see the biggest shortcoming in the fact that the state created the product without necessary analyses of the needs of clients and the market.”
VÚB sees the extent of its currently offered products to be broad enough to satisfy any of its customers and does not see the need for the basic banking product.
“Contrary to the pre-defined basic banking product, our clients can assemble their own package and select only the services that they will actually use and pay only for them,” Alena Walterová, the spokesperson of VÚB, told The Slovak Spectator. “The biggest restraint of the basic banking product lies in the fact that its composition is too extensive. It contains services which a client may never use but the bank has to take their costs into consideration for the final price of the product.”
Walterová also pointed out that the composition of the basic product does not save customers from payment fees when using their cards in neighbouring countries that do not use the euro.
“The composition of the product is that its price includes all card payments within the European Economic Area carried out in euros,” she said. “But if a client pays by card in the local currency, for example in Hungary, the Czech Republic or Croatia, a fee will be paid for such a transaction.”
Vladimír Dohnal, an analyst with Symsite Research, a private, independent business intelligence group, is also critical of the actions of the past government. He says it tried to solve a non-existent problem.
“Bank fees in Slovakia are not high in international comparisons,” Dohnal said, as cited by the Hospodárske Noviny daily in mid September. He added that the previous government set the parameters of the product without taking into consideration the real needs of banking customers. Bank customers in Slovakia need a card attached to their account that they can use without foreign transaction fees, according to Dohnal.
Names say a lot
Commercial banks' lack of enthusiasm for the basic account is reflected in the names they have given to their versions of it. While banks usually give catchy names with a positive tone to their products, this time most have stuck with calling it the ‘basic banking product’. Some have chosen even less alluring names, for example Tatra Banka's version of the package is called the “legislative account”.
Only Dexia Banka, which is offering the basic banking product at a fee of €2.55 per month – the same price as for its most popular package of services – is using a more attractive name: Výhoda, which means 'advantage' in English.
8. Nov 2010 at 0:00 | Jana Liptáková