Price discrimination at play?

In many cases, the relationship between most commercial banks and their customers has been one of mistrust, at least in my view, especially when it comes to service charges or fees.

Until a few years ago, very few commercial banks in Malawi would publish their tariffs for customers to make informed decisions and indeed know what they were paying for.

I recall Stanbic Bank (now Standard Bank Limited) caused in the early 2000s when it published charges for services such as over-the-counter (OTC) transactions, mostly withdrawals, and automated teller machines (ATMs). That was soon after the Standard Bank Group had bought a 60 percent stake of Commercial Bank of Malawi (CBM).

Stanbic Bank’s archrival, as it were, National Bank of Malawi (NBM) reacted with full page adverts that taunted the newcomer on the market for introducing the service charges. I recall one NBM ad, depicting an elephant, declared: “This bull does not charge.”

In response, Stanbic developed an ad showing open palms with a bold caption: “We have nothing to hide.”

Thereafter, Stanbic (later Standard Bank) revised some of its charges and the other banks, including NBM, started publishing the charges for their services.

I liked the boldness of Standard Bank in being transparent with the charges in a market where very few players openly advertised the same.

Scanning through social media posts, especially on Facebook and WhatsApp, my attention was recently drawn to concerns by some customers of NBS Bank who questioned the wisdom behind the bank’s charging of K150 or so for every ATM transaction and K500 for OTC withdrawals of less than K150 000.

The posts drew mixed reactions, but what strongly came out was an observation that the charges, especially for withdrawals of less than K150 000 or so were discriminatory and counterproductive to nurturing or cultivating a saving culture.

In economics, there is a theory of price discrimination which is defined as a pricing strategy service providers use to charge customers varying prices for the same product or service.

Price discrimination is used in various ways. Many service providers who employ this theory tend to use it to “eliminate” a certain section of customers and keep the high earners or spenders.

I find the situation at NBS Bank fitting the elimination aspect. By charging a customer for withdrawals of less than K150 000, the bank, in my view, is telling them that it wants to focus on serving those with fat bank accounts. Why should a customer be forced to withdraw more simply to escape a K500 charge? How many K500s is NBS Bank collecting?

Like in the case of Stanbic Bank (now Standard Bank), NBS Bank would do well with more transparency to explain the rationale behind the charges.

The Reserve Bank of Malawi (RBM), as the regulator of financial services, should also provide a guideline on services customers are supposed to be paying for. This is even more important especially now when most commercial banks have bundled packages where they charge a monthly fee for most of the transactions.

With banks encouraging customers to use electronic platforms such as mobile banking and Internet banking to ease congestion in banking halls, unless I am missing something, I do not find it sensible for them to be charging the customers for using Internet banking. No wonder banking halls remain congested.

In the hospitality industry, pricing in the newly refurbished Sportsman’s Bar at Sunbird Mount Soche has also drawn frowns from previously regular patrons of the joint. I understand the hotel is charging K2 000 for a bottle of Carlsberg Green Beer brewed at Makata in Blantyre and up to K3 200 for a bottle of imported beers or ciders (Heineken, Windhoek Lager, Hunter’s Dry, Hunter’s Gold and the like).

Reacting in one of the WhatsApp groups, one frustrated customer remarked: “This is typical price discrimination. They don’t want us, the poor, to patronise their place.”

Perhaps these are some cases the good Competition and Fair Trading Commission (CFTC) and the Consumers Association of Malawi (Cama) would wish to pursue to get the justification. While every business prices its products and services according to mark-ups, among other factors, the pricing should be fair and make sense.

Some food for thought from the Lions Clubs Code of Conduct: “To remember that in building up my business it is not necessary to tear down another’s; to be loyal to my clients or customers and true to myself”.