Banking

KWAME NKRUMAH UNIVERSITY OF SCIENCE AND TECHNOLOGY

COLLEGE OF ARTS AND SOCIAL SCIENCE

SCHOOL OF BUSINESS

MASTER OF BUSINESS ADMINISTRATION (MARKETING OPTION)

FULL TIME. YEAR TWO (2)

ADVANCE CONSUMER BEHAVIOUR

STUDENT NAME: OWUSU YEBOAH KOFI

EXAMS No. PG2549308

1.0 INTRODUCTION

In the first section of this assignment, the reader is introduce to the history of bank, definition of bank, types of bank (including universal banking), and banking activities. The reader is then introduce to who a bank customer is, and the kind of relationships that exist between a bank and it customers.

1.1 History of Bank• According to Shekhar and Shekhar (2007),”it may be said that

banking in its most simple form is as old as authentic history. • Babylonians, Greece, Egypt, Assyria, and Phoenicia developed

various systems of banks. • in Rome, the bankers were called ARGENTARII, MENSARII, or

CALLYSBISTOE. The banks were called TABERNOE ARGENTARIOE.

• The name bank derives from the Italian word BANCO "DESK/BENCH", used during the Renaissance by Florentine bankers.

• The earliest evidence of money-changing activity is depicted on a SILVER DRACHM COIN from ancient Hellenic colony TRAPEZUS on the Black Sea, modern TRABZON, c. 350–325 BC, presented in the British Museum in London. The coin shows a banker's table (trapeza) laden with coins, a pun on the name of the city.

• In fact, even today in Modern Greek the word Trapeza (Τράπεζα) means both a table and a bank (Wikipedia 2009).

1.1.1 Early Banks• Although banking activities was done by private individuals in

the early period, many countries established public banks either for purpose of facilitating commerce or to serve the Government.

• The bank of Venice, - 1157.• ‘Monte’ in Florence in 1336. • In Barcelona, the first public bank was established in 1401.• The bank of Amsterdam was established in 1609 to meets the

needs of merchants.• The Bank of England was established in 1694 (Turkson 1997).• In Ghana, the British Bank of West Africa (BBWA) now

Standard Chartered Bank LTD. Was established in 1897 as the first commercial bank in the then Gold Coast. Ghana Commercial Bank Ltd Was established as a wholly state-owned banking institution in 1952, started operations in 1953. It was originally known as the Bank of Gold Coast under the colonial administration.

• the Central Bank of Ghana was established on 4th March, 1957. It was established as a central bank to relieve the Ghana Commercial Bank of some of its banking functions.

1.2. What is a Bank?

a. A bank is a financial institution where you can deposit your money. Banks provide a system for easily transferring money from one person or business to another.

b. The definition of bank is based on Common Law (Awuah 2007). He cited the United Dommion Trust v Kirkwood 1966 case, where it was held that, the essential characteristics of the business of a bank are:

• The collection of cheques for customers• The paying of cheques for customers• The keeping of current accounts for its

customers.

1.2. What is a Bank?(cont)

The Banking Law 1989 PNDC 225 defines a bank as: “any body corporate which is issued with a license for the business of banking “and the business of banking” as “the acceptance of deposits for money from the public on demand and withdrawable by cheques , drafts, orders or by other means” or “the financing, whether in whole or in part, or by way of short, medium or long term loans or advances for trade, industry, commerce or agriculture.” (Awuah 2007).

1.3 Types of Bank/Activities1.3.1 Types of banks

According to Turkson (1997), there are several types of banks in Ghana. These may be categorised as the Central bank (Bank of Ghana), Commercial Banks, Development Banks, Savings Banks, Merchant Banks and Rural Banks.

1.3.2. Banks activities.

Banks' activities can be divided into:• Retail banking, dealing directly with individuals and small

businesses.• Business banking, providing services to mid-market business;

corporate banking, directed at large business entities.• Private banking, providing wealth management services to

high net worth individuals and families.• Investment banking, relating to activities on the financial markets.

Most banks are profit-making, private enterprises. However, some are owned by government, or are non-profit organizations.

• Central banks are normally government-owned and charged with quasi-regulatory responsibilities, such as supervising commercial banks, or controlling the cash interest rate. They generally provide liquidity to the banking system and act as the lender of last resort in event of a crisis. (Wikipedia 2009)

1.3.2.1 Types of retail banks

• Commercial bank • Community Banks: • Community development banks: • Postal savings banks: • Private banks: banks that manage the assets of high

net worth individuals. • Offshore banks: banks located in jurisdictions with low

taxation and regulation. Many offshore banks are essentially private banks.

• Savings bank• Building societies and Landesbanks: institutions that

conduct retail banking. • Ethical banks: transparency and socially-responsible

investments. • Islamic banks: Islamic law. avoid interest. earns

profit (markup) and fees on the financing facilities

1.3.2.2. Types of investment banks• Investment banks "underwrite" (guarantee the sale

of) stock and bond issues, trade for their own accounts, make markets, and advise corporations on capital market activities such as mergers and acquisitions.

• Merchant banks were traditionally banks which engaged in trade finance. The modern definition, however, refers to banks which provide capital to firms in the form of shares rather than loans. Unlike venture capital firms, they tend not to invest in new companies.

• 1.3.2.3. Universal banks, more commonly known as financial services companies, engage in several of these activities. These big banks are much diversified groups that, among other services, also distribute insurance— hence the term bancassurance, a portmanteau word combining "banque or bank" and "assurance", signifying that both banking and insurance are provided by the same corporate entity.

1.4. Who is a bank customer?

• At one time a customer was defined as anyone who had an account with the bank.

• The number of transactions or the length of time the account has been in operation was immaterial.

• In ladbroke Vs Todd, , “the relation of a banker and a customer begins as soon as the first cheque is paid in and accepted for collection.

• In woods v Martins & Another (1958), it was held that a bank which gave investment advice to someone who did not have an account had some contractual duty of care as if that person had held an account with that bank (Awuah 2007).

• A person who has an account with a bank is definitely a customer. A person to whom the bank provides financial services without including a bank account is a customer as regards the duty of care owned.

1.5 The Basis of the Banker- Customer Relationship

• Contractual.• Debtor-Creditor. • Principal and Agent.• Bailor and Bailee. • Trustee and Beneficiary.

2.0 THE BODY

• At this section, the reader is introduce to factors different writers think customers consider in choosing a bank.

2.0 THE BODY (cont)

According to Money supermarket.com (2009), the following are important factors customers consider when choosing a bank:

1. The location. 2. Access to telephone and internet banking. 3. Cash point functions: Can you

deposit money? Can you get a printed mini-statement? Can you order a cheque book?

2.0 THE BODY (cont)

• David Willet (cited by smebusinesscashflow.com 2009), outlined ten factors businesses should consider when choosing an account. Some of these factors have being stated by Money supermarket.com. The ten factors are

• Will the bank manager or a small business relationship team be available to discuss urgent matters with you?

• Does the bank offer an initial period of free banking?• Does the bank offer an online banking service?• Does the bank pay interest on any credit balance?• If your business is primarily cash based transactions, how will

this be handled by the bank and at what cost?• Will you be able to accept debit or credit card payments for

your goods or services?• What charge basis will be used for use of the bank account? 

Will fixed periodic fees be applied or will charges by transaction type be levied?

• Will regular update meetings be held to discuss your business and its future banking requirements?

• Will the bank agree an overdraft limit?• Are the bank manager and customer services team people you

can build a trusting working relationship with?

2.0 THE BODY (cont)

• wiseGeek.com (2009), also outline that, a major consideration for many people when choosing a bank is accessibility and availability. If you travel a great deal, for example, you will want a bank with an extensive branch and Automatic Teller Machine (ATM) network. If you have a tight schedule, you may want a bank which offers extended hours, or is open on the weekends. You may also want to think about choosing a bank which is a quick walk from home or work, making banking very easy for you.

• You should also ask yourself how you want to deposit money at the bank. Most banks offer both checking and savings accounts, which may bear varying levels of interest. Some banks also require a minimum deposit, which is an important consideration if you are on a tight budget. While thinking about the types of accounts you want, you may want to think about how many cheques you write each month, and if you will need extra services like traveler's checques, direct deposit, or a debit/credit card.

• Many people like to do their banking online or by telephone. If this is important to you, find out whether the banks you are interested in offer these services, and if additional charges are imposed. You may also want to explore their online interface, to see whether or not you like using it. While asking about fees for these services, you should check on general banking fees as well, as these can vary from free to quite expensive, depending on the bank.

• Finally, you should think about how you will be using the bank. If you are choosing a bank for personal accounts and nothing else, your needs may be different than someone who needs a bank for a business account as well. In addition, you may want to consider whether or not you want options such as a mortgage or car loan through your bank.

• Centralizing your accounts in one place can be convenient, and you may be able to get a better deal.

2.0 THE BODY (cont)

• Lee and Marlowe (2003)- Convenience - They defined convenience: location of office and\or other convenience features, such as payroll deductions and direct deposit; location, hours of operation, ATM availability and online banking as important convenience features; brick-and-mortar-oriented (such as convenient locations and hours of operation) or self-service-oriented (such as availability of ATMs and internet banking).

• Retail fees and minimum balance requirement .

2.0 THE BODY (cont)

• Experience with personnel at a financial institution is an important criterion.

• The range of services offered as important criterion. The range of services includes safety deposit box, travelers’ cheques, and electronic funds transfer through wire.

• Family and friends for recommendation of financial institutions, or use some kind of rule of thumb. Such statements as “my father is a CPA and he knows....” and “I got a recommendation from her to go to (institution)” are examples of using word-of-mouth.

2.0 THE BODY (cont)

Owusu-Frimpong (2009) also in his research agrees with Lee and Marlowe and indicated that Ghanaian customers rank the following factors as important:

• High rates of interest paid on accounts and being understanding are considered extremely important.

• Efficient service• Range of services, regularity of statement, being community

minded and personal services were generally considered less important. The latter is particularly important as it suggests that, at present, personal service\personal interaction (which is considered of particular significance in developed countries) is relatively unimportant in a developing country context.

• He stated that in deciding which bank will suit, the customer decides on values, beliefs, needs, his own knowledge and past experience of banks.

3.0 CONCLUSION AND IMPLICATION

Different customers consider different factors before selecting a bank. It must be noted that different customers have different needs and thus consider whole array of attributes. While some customers’ will look at a dominant attribute, others consider multi-dominant factors. Yet, others do not consider any attribute at all. For such people they choose a particular bank because they have been told by family and friends. It is also clear that age limit can also influence decision-makers in choosing a particular bank. Individual customers as well as corporate customers also consider different factors. What an individual customer may consider as a dominant factor may not be so for the corporate citizen. However, from our studies so far, it is clear that there are certain factors that cut-across all the writers relating to the factors that, consumers consider before choosing a bank, even though difference may arise as to which factor(s) may dominate the decision makers criteria.

3.0 CONCLUSION AND IMPLICATION (cont)

These factors are:

• Convenience.• Technological innovations.• Fees and minimum balance.• The range of services offered.• personal relationship• efficient service• trust in the competence of the

bank’s personnel• Customers own knowledge of banks

and past experience.

3.0 CONCLUSION AND IMPLICATION (cont)The managerial implication is that, in this competitive banking sector, if a

banker wants to beat the competition in order to attract more customers and to gain their loyalty and retention, banks must offer convenient services. They should look at accessibility and availability, and more importantly research into what customers consider as important attributes of convenience, such a bank must also be abreast with technology, facilities such as internet banking, telephone banking, ATMs, and others must be heavily invested into. .Infact such a bank must aim at technological leadership. Cost leadership must be their watchword, and even where cost leadership seem impossible within a particular circumstances, at least customers must get Value for Money. Marketers must research into the needs of customers and develop financial products and services that will suit their taste. Investing in people to make the personnel customer-oriented, and also to improve upon their interacting marketing skills and competence, so that they can deliver with the highest quality and standard will be what will differentiate one bank from the other, thereby improving upon their corporate image. It is also important marketers must let customers feel at home especially at the bank premises. They should not be made to feel unwanted, and abandoned. Marketers must show a duty of care towards their customers. After all, research has shown that it cost twice to attract a new customer than to retain one. This is the more reason why internal marketing is very important. Lastly but not the least positioning is very important, as well as the application of different promotional mix. This helps increase both potential and existing customers knowledge of the bank

REFERENCE: • Awuah. M.E (2007), Law Relating to Banking: Banker workbook series, (2nd Edition),

Ghana, The Chartered Institute of Bankers (GH), pp1-3• Gerrar. J.K. (1999), Practice of Banking I (law and Practice): Bankers Workbook series,

(1st Edition), Accra Ghana, The Chartered Institute of Bankers, pp1-2• Shekhar K.C and Shekhar. L (2007) Banking theory and Practice, (19th EDN), Delhi,

Vikas publishing House PVT LTD, pp491-492.• Turkson. J.K. (1997), Business Management for Senior Secondary Schools (WASSCE),

(1st edn), Kumasi, Jakentee Publications, pp329-331.• Lee. and Marlowe (2003), How consumers choose financial institutions: Decision-

Making criteria and heuristic, international journal of bank marketing, pp58-66 {online} (cited 5 October). Available from < URL:http:\\www.emeraldinsight.com\>.

• Owusu-Frimpong, N. (1999), Patronage behavior of Ghanaian bank customers, international journal of Bank Marketing, pp338-340 {online} (cited 5 October). Available from < URL:http:\\www.emerald-library.com\>.

• Smebusinesscashflow (2009) smebusinesscashflow homepage [online] (cited 5 October). Available from < URL:http:\\www.smebusinesscashflow.com\>.

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