The value of the banker-customer relationship: CONCLUSIONS

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This paper presents a dilemma for bankers. It is a common dilemma as short-term profits are often prioritised ahead of long- term gains. It also presents a range of options for the bank when customer default presages formal insolvency.

Traditionally, ‘short termism’, driven by the need to satisfy shareholders, has taken overwhelming precedence over the need to develop long-term relationships with customers. Increases in the level of competition have, however, focused attention on the importance of customer retention and the active management of the banker—customer relationship. Consequently, banks that were traditionally transaction oriented, with an emphasis on standardisation and centralisation, in an endeavour to reduce costs, are emerging as relationship-oriented organisations. The value and importance of relationship strategies in reducing moral hazard in the provision of credit to personal customers has been discussed. The paper also recognises the impact of moral hazard on the administration of insolvency law, which, since 1986 has embraced the concepts of rescue and survival.

Insolvency law has, in this respect, been ahead of the ‘thinking’ within banks and, significantly, has reflected the changing ethical attitudes of society to debt. In beginning to emerge as relationship- oriented organisations, therefore, the banks are adopting the values of society and the legal system but still have a long way to go in taking full advantage of IVAs. In a competitive environment banks need to embrace the importance of business rescue and survival in order to benefit from customer retention and continuing relationships with their debtor customers.

 

Representative APR 391%

Let's say you want to borrow $100 for two week. Lender can charge you $15 for borrowing $100 for two weeks. You will need to return $115 to the lender at the end of 2 weeks. The cost of the $100 loan is a $15 finance charge and an annual percentage rate of 391 percent. If you decide to roll over the loan for another two weeks, lender can charge you another $15. If you roll-over the loan three times, the finance charge would climb to $60 to borrow the $100.

Implications of Non-payment: Some lenders in our network may automatically roll over your existing loan for another two weeks if you don't pay back the loan on time. Fees for renewing the loan range from lender to lender. Most of the time these fees equal the fees you paid to get the initial payday loan. We ask lenders in our network to follow legal and ethical collection practices set by industry associations and government agencies. Non-payment of a payday loan might negatively effect your credit history.

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