The retail banking market in the UK is currently dominated by huge global organisations, such as Barclays, Lloyds, and HSBC. Smaller, local banks are often overlooked for these major chains. This article by Misys examines how even in emerging markets such as the Philippines, global banks are taking over and posing a strong threat to local banking businesses.
However, there are advantages to using a smaller bank that most people may not have considered. Here’s a quick overview of the benefits of global and local banks, to help you decide how best to manage your money.
One big advantage of global banks is there are plenty of branches and ATMs throughout the world. For example, Lloyds Banking Group has over 2000 branches in the UK and operates in 30 countries. This brings the convenience of being able to visit your bank and withdraw money wherever you go. This is particularly useful for travellers and those who go on frequent business trips abroad and want global ATM access.
Global banks also have access to cutting-edge technology that local banks may not. Larger banks will offer services such as online banking, 24/7 mobile banking, and contactless card payment. Global bank Citibank have won a great deal of customers in the Philippines by promoting services seen in developed countries, for example they were the first bank to introduce contactless payment.
However, there are some advantages to using local banks. As the branches are smaller, customers receive a more personalised service. Unlike with larger banks, it is possible to have the same member of staff serve you each time and build a relationship with them. Larger banks tend to have many reporting levels and a higher level of staff turnover, making them harder to navigate and negotiate a good deal with. This is why local banks often have high customer satisfaction.
Local banks can also offer lower fees than their global counterparts. National data shows that average fees at local banks are substantially lower than at larger banks. For example, 63% of small banks in the USA offer free checking services, in comparison to 25% of larger banks. They also offer, on average, higher interest, lower overdraft fees, and lower interest rates on credit cards and other loans.
Small businesses in particular could benefit from the services provided by local banks. Global banks allocate relatively little of their resources to small businesses; over half of small business lending is through small to medium sized banks despite them controlling under a quarter of all bank assets. However, in smaller banks like FLCBank, for example, they tend to provide banking for attorneys, small businesses, merchants, and local communities alike. The loan approvals are made by local people who understand the community and have personal relationships with the customers, which means that local banks can often approve small business loans that bigger banks would reject.
In conclusion, every bank has its advantages and disadvantages. So when you are deciding how to manage your money, don’t just look at the big banks, as small local banks are worth considering too.