Miruna Codeanu

Cyprus: what it means to the banking brands

In Uncategorized on March 18, 2013 at 6:44 am

I will assume everything we know about Cyprus bailout is everything there is to know about it, there might be more, there might be less,  might be that nobody obliged Cyprus to accept the conditions imposed, might be that there should have been a plan B, a plan C.

You are a consumer of banking services. If you have a deposit the bank will not be doing you a favor by keeping your money. You made a deposit, the bank will be paid for its services through a management fee for your account or by just the gains it makes by being able to “play” with your money until you decide you need them.

You have a profile as a customer and by your age and your spending habits the bank knows your are more or less likely to need your savings. By choosing a certain bank over another bank you made a buying choice for your bank which translates into confidence put in a certain bank and a certain service. Long before people started trusting banks, serious money were thrown into convincing people to trust banks. Customer’s trust in banks wasn’t built overnight. Problem is, image crisis are born overnight, most of them are “you wake up and realize ..”. And so it was, for the banking world: people in Cyprus woke up one day and realized they were forced to pay in between 6.75% and  9.9% in order for Cyprus to obtain the 10bn-euro bailout.  This is a huge problem for the image of banks throughout the world, it is huge negative, pitch-black PR for banks. It is not eating horse meat instead of beef, it is eating human flesh which is totally socially unacceptable.

Let me put this otherwise: you decide you need a new laptop, you analyze the offers available, you ask your friends about their user experience and you finally decide for what satisfy your needs. You buy it, you use it for like a month and then the shop tracks you and obliges you to buy 100 euros more because they suddenly realized your laptop should have been more expensive because the manufacturer analyzed their costs and they had more expenses producing it. No, it is no simplification, there is pure equivalence in between the two. Also, there is no consumer protection to cry to.

You are a bank, you have services that your market. I a buyer/consumer of your services and when I make a buying decision I expect you to deliver what I paid for. So, I made a buying decision for placing my money in an account so I paid for a safe deposit, and since I’m paying you for that I’m expecting you to deliver that. You fail, and your competitor fails and the other competitor fails, then we have a crisis with a segment which, because the costumer will not be able to punish you by going to your competitor will translate in loss of confidence with your entire branch.

This is not a local problem, with a bank in Cyprus, it is a problem with all the banks in Cyprus, with all the banks, it is the power of example. The pure existence of such an idea, of such a solution will shadow the already shaken image of the banking world. Serious money will have to be put into branding and marketing to whitewash the banking world and the services.

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