Domestic banks have every reason to attempt charging for premium services as their foreign competitors do, but thus far it seems that's not an option for them.
New York-based financial giant Citibank, the first foreign bank allowed to provide forex services for Chinese customers, has recently set an eye-opening example by imposing service fees on certain clients. The bank now charges a US$6 monthly account maintenance fee if the customer's bank deposit falls to remain at a minimum US$5,000.
Such a fee is sometimes hard for the public to swallow. It was reported that a Chinese client even filed a suit against the bank's Shanghai branch, arguing such practices are discriminatory towards small account holders.
However, public enthusiasm for first-class services provided by this foreign bank has, nevertheless, continued to surge.
Citibank's explanation -- that its high-end, client-oriented measure is an international practice -- might be a surprise to the public but appears to be food for thought on the part of domestic banks.
Given the heavy burden of non-performing loans and the widening gap between savings and loans, it is fully understandable that domestic banks would try every means to find new sources of revenue.
And charged services are a gold mine yet to be exploited. Just think about the astronomical number of individual account holders in China.
However, instead of improving their services, many of them have struggled bitterly for market share by trying to underprice other competitors.
Citibank's charge on small accounts should be a wake up call to all China's banks that before profit comes quality service. And thus, drastic reform of domestic banks is now a must.
(People's Daily April 26, 2002)
