e74cd5c4ac158210VgnVCM200000e66411acRCRDapproved/thenational/Articles/Migration/2010-02Banking in the UAE is different than almost everywhere elsed74cd5c4ac158210VgnVCM200000e66411ac____Banking in the UAE is different than almost everywhere elseWhether you are new to the country or considering taking your business elsewhere, our banking guide will help you make the right choices.<p>It was an experience familiar to many who bank in the region.
Gustav Bivdred, a Swedish pilot, established an account with a UK-based bank shortly after arriving in Dubai three years ago, and not long afterward opted to take advantage of the free transfers the bank promised in order to send some money back home. The transfer went through smoothly - except the bank hit him with a Dh100 service charge on the back end.
"It's not about the money, but the principle," Mr Bivdred said.
"They are not telling you the truth of what to expect from your banking experience." Indeed, for many local residents, banking is a chief frustration of life in the UAE.
Hidden fees. Poor customer service. Unfamiliar and somewhat outdated terminology.
To be sure, those complaints are prevalent among banking customers worldwide. But they seem particularly intense here.
The reason for this is that often the processes involved are simply unfamiliar to newcomers in so many different ways.
Some of those differences are pleasant surprises - for example, many new arrivals rave about their bank sending them text messages to inform them of cash withdrawals and big purchases - but most are at least slightly annoying.
There are signs that this could be slowly changing for the better, as financial institutions here are increasingly focused on addressing customer concerns, says
Robert Keay, managing director of Ethos Consultancy in Dubai.
Regional banks for the past three or four years were content to sign people up for credit cards, perhaps a personal loan, and then get them out the door as soon as possible.
Of course, that was sustainable only as long as the region's explosive growth continued. When it did not, banks were forced to put a renewed emphasis on customer service.
"If there is a smaller pool of potential customers, then you better look after the ones you've got," Mr Keay says.</p>
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<p>In its annual customer service survey, Ethos used "secret customers" to evaluate 27 local banks. Based on 1,350 contacts with branches, call centres and websites, the firm found that UAE financial institutions improved their customer service dramatically in 2009 compared to previous years. Branches and call centres recorded the bulk of the improvements; on the flip side, most banks' online capabilities leave much to be desired - 57 per cent of Ethos' secret customers were not happy with website services.</p>
<p>There also remains room for improvement in terms of product knowledge, disclosure of fees and addressing consumer complaints.
"Very few banks have figured out what the customer service journey really is," Mr Keay says. "It isn't all about smiling and saying, 'Have a nice day.'"
Still, consumers are not entirely without responsibility. The fact is that banking here is different than almost anywhere else, and it is arguably unfair to expect it will function exactly the same as it did in your previous home country. The key is to know what to expect.
Here are some of the major differences consumers may encounter in the UAE if they are used to banking elsewhere:</p>
<p>Those from countries in which consumers can establish a bank account or arrange a loan with a few clicks of a mouse will be surprised - and dismayed - by the hoops they need to jump through in order to open an account here. Most banks will require three documents: a copy of a valid passport, copy of a residence visa and a letter from your company confirming that you are employed.</p>
<p>Banks have several reasons for requiring these extra layers of identification. One is the tough laws here designed to help prevent money-laundering.
Another is that there is no national credit rating bureau in the UAE, so banks want to know the salaries of their customers, as they consider it the best available gauge of a consumer's ability to pay. And, similarly, linking consumers to their employers is one of a bank's only means of tracking a transient labour population.</p>
<p>"People are far more mobile in this part of the world. With that mobility comes greater risk," says Graham Honeybill, the general manager of RAKBank. As a result of these precautions, it is not uncommon for it to take two weeks or more after beginning the application process for your account to become active.
Another common snag arises because some banks do not have procedures in place to share data among departments. A current customer may be required to fill out one set of paperwork for a checking account, another for a personal loan and a third for a credit card - even though the information requested is largely the same. The paperwork will also be processed at different speeds.
One recent change may give consumers at least a little bit of consolation - before approving a personal loan, some local banks now require a letter from the applicant's employer attesting that the applicant will not be laid off in the next three months.</p>
<p>Many expats, particularly westerners, are comforted by the presence of familiar brands in the UAE - Citibank, Barclay's and HSBC, to name a few.</p>
<p>But it's best to think of the local versions as friends of the global banks, not family. Banks here operate under the rules and regulations of the Central Bank of the UAE.
There are some services and privileges available to customers within a foreign bank's international network, but not all of them are offered free of charge.
In other words, you need to open an account locally in order to get the full available services.
It is not possible, for example, for a Citibank customer from the US to deposit funds into his account from a Citibank location in the UAE without paying a fee.</p>
<p>It is only a minor exaggeration to say that banks were handing out credit cards like sweets during the height of the boom.
For consumers, the cost of such easy credit was hefty interest rates. Banks here typically charge around 3 per cent in interest each month, or roughly 36 per cent annually, well above acceptable rates in most Western countries (as in the UK and the US, there is no limit on what interest rates banks can charge).</p>
<p>These days, banks are somewhat stingier, and more careful. While interest rates continue to be high, banks are increasingly considering factors such as how long the applicant has lived in the UAE and worked for the same employer. And whereas many banks not long ago thought little of handing new arrivals cards with Dh90,000 limits, they are now more likely to offer cards that top out at Dh15,000 or so until the applicant develops more of a history with the bank.</p>
<p>However, consumers should pay attention to the annual fee associated with cards they are offered, as many carry fees of several hundred dirhams. Also, it is not unusual for banks to calculate the rates using the "nominal" annual percentage rate (APR), meaning the accrued interest is tacked onto the balance each month.
The resulting power of compounding interest could add several percentage points to the cost of the card each year.</p>
<p>Because of the highly mobile population here, banks are vigilant - some would say aggressive - in protecting against account-holders who may try to "do a runner" and leave town without paying their debts.
As mentioned, the UAE does not have a credit bureau or bankruptcy court to deal with consumers who cannot meet their obligations, and though the Government is considering the establishment of a nationwide bureau, until that happens banks are taking matters into their own hands.</p>
<p>When the economy turned south, consumers who simply missed a single credit card payment reported receiving calls from bank representatives threatening jail if they did not pay up. The calls are particularly frightening because the UAE does have strict laws that could mean a prison stay for those unable to pay their debts.
In recent months, banks including HSBC and Citibank have introduced measures such as low-interest loans and temporary grace periods in an attempt to collect debts consumers in a less antagonistic fashion.</p>
<p>However, it's not just those drowning in debt who are targeted. When an employee leaves a company, whether voluntarily or not, the Ministry of Labour requires the employer to notify the bank.
The bank typically freezes the employee's accounts until all debts are settled or it is notified that the account-holder has a new job.
In most cases, the account will be unfrozen soon after the bank is notified that the account holder has the means to pay his or her liabilities. But some consumers have run into extended problems accessing funds needed for mortgages and other critical expenses. "I have heard of cases where the primary account was frozen for three to four months," says Barry Judge, director of marketing for Ethos.</p>
<p>Almost all regional banks have developed websites that allow customers to do most of their personal banking online, though many of them still treat their cyber offerings as poor stepchildren. And the functionality of most of the site still lags Western standards.
For example, to open or close accounts or conduct a complicated transaction, "in most cases, you will have to meet with someone at your office or your home," said Mr Keay, of Ethos.</p>
<p>He notes that this could reflect that many customers of UAE banks come from countries with strong trading cultures who feel more comfortable doing business in person and never use the internet to carry out financial transactions.
Indeed, some banks seem to ignore the internet altogether. In the Ethos survey, 66 per cent of mystery customers reported that they never received a reply after submitting a query through their institution's website. Even RAKBank, ranked top customer service bank by Ethos for four straight years, was compelled to make its website more user-friendly last month in response to numerous customer complaints, said Mr Honeybill.</p>
<p>"I hate to say it, but we were doing something the customers didn't like so we took steps to improve it," he said.
Let's hope that the rest of the pack follows RAKBank's lead and begins paying more attention to our needs. If they do, they will profit, along with their customers.
* With additional reporting by Sanam Islam</p>
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