Cash under the mattress: a new chapter for regional banks
Everyone’s got a theory about where best to keep money. And even though banks used to be the go-to alternative, its future remains uncertain. That is, if they don’t change.
March 25, 2012 3:55 by kippreport
Would you put your cash under a mattress and not accrue interest or put it in a bank with a petty interest rate? This is just the question posed by The National’s Felicity Glover in her article this week about the lending practices and debit versus credit card interest rates that are present today.
The article suggests the idea of all of us collectively taking our money out banks and to keep it under our mattresses instead, as a kind of #OccupyBanks-type protest to jolt banks into managing our money and extending the interest rates on our savings and deposits.
While it really isn’t so simple to just expect a whole economy to continue running with banks that don’t have any money (they won’t be able to give businesses loans so they can continue operating, for example), the article does address this issue that people are getting tired of being kept in the dark with how their hard-earned cash is being handled. After all, leaving it up to the bean counters around the world to manage the markets and our savings for us arguable got us to the economic situation we are in today. So why not create a system of public accountability and a degree of transparency.
The banks do want us to trust them again, don’t they? …Don’t they?
I know what you’re thinking. These banks won’t have the incentive to be more open about their activities and to share some of the wealth by increasing current interest rates. But although I see this is entirely plausible, I also see the benefits of banks earning customers’ trust again.
One such reason is that a confident banking system without anything to hide will automatically create confident consumers. In 2009 and 2010, there was a decline in credit card usage in the UAE because people were uncertain about the stability of their financial status. Developing projects that create longer-term stability for customers can no doubt boost the market. The key term here is long-term.
So far, it’s been about creating market liquidity through short bursts of product and services promotions. This month, for example, in recent statistics released by Visa, credit card usage is seen to have grown by 16 percent to $8.6 billion for the 12 months ended in September 30. So does this mean the coast is well and truly clear? Well, what do you think?
The answer is not quite. According the Gulf News article, this increase could have possibly been because of the various rewards and incentives for people to use credit cards. It may also have something to do with the regulatory pricing changes banks have made on debit cards, driving people to opt for credit card use instead. Some might argue this is very short-term thinking.
Instead of muscling customers into opting for products that have higher interest charges to create market liquidity, why not go back to basics and create products that speak to the customer’s long-term financial concerns and with fair and realistic interest rate offers. Particularly in the UAE, this is a challenging proposition considering most expatriates are sending most of their earnings back to their home country, living very little left for banks here to play with. But in an ideal world, this is a challenge that banks should investing time and resources to take on.