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HomeExecutive BriefImperative of CBN intervention in curbing bank excessive charges on customers, SMEs

Imperative of CBN intervention in curbing bank excessive charges on customers, SMEs

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By Toyosi Afolorunsho

Bank charges can have far-reaching effects on both bank customers and businesses. These fees, charges, and deductions, whether they take the form of transaction charges, maintenance fees, or ATM withdrawal fees, can have an adverse effect on a company’s operations and profitability while also placing a financial burden on customers and limiting their access to banking services.

Excessive bank fees can place a heavy financial burden on bank customers. Transaction costs and monthly maintenance fees deplete the available cash balances of businesses and individual account holders, making it harder to save money or satisfy urgent financial demands.

People with low incomes or those who have low account balances may find this deduction burdensome and a strain on the financials. They might find it difficult to pay the bills, which would have a detrimental effect on their overall financial situation and widen the wealth gap.

Exorbitant bank fees may force people to use financial services less frequently while bank customers may decide not to conduct transactions or use services that charge a fee, which can lead to a reduction in financial inclusion.

Customers might turn to less safe options or carry more cash if they avoid using ATMs because of the withdrawal costs, which raises the possibility of theft or loss. Customers may also choose not to send money electronically or make payments in order to save transaction fees, which would make the financial system less effective and more complicated.

For their daily operations, businesses, especially small and medium-sized businesses (SMEs), primarily rely on banking services. Their operational costs might be greatly increased by bank fees, such as transaction fees or fees for cash deposits. These fees can reduce SMEs’ profits or force them to raise the price of their goods and services, which would reduce their ability to compete.

The increased costs may limit expenditures in technology or personnel development, limit expansion opportunities, and ultimately threaten the financial stability and long-term success of these companies.

SMEs are especially susceptible to bank fees due to their limited financial resources. These fees may have a detrimental effect on their cash flow, lower company profitability, and limit their ability to grow and expand operations, including employing more hands. Excessive transaction costs, for instance, may deter SMEs from accepting electronic payments, limiting their capacity to reach a wider client base.

The amount of money that SMEs have available to spend on marketing, R&D, and other growth-oriented activities may also be limited as a result of the cumulative impact of various bank fees.

High bank fees have made it possible for non-bank financial alternatives to flourish. Customers and businesses are switching to peer-to-peer lending platforms, fintech firms, and mobile payment platforms in search of less expensive or fee-free choices. These alternatives provide practical, affordable solutions that have the potential to upend the conventional banking industry.

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Traditional banks may find it difficult to keep customers and adjust their rates in order to remain competitive in the changing financial landscape as consumers and businesses look more and more toward non-bank alternatives.

Excessive bank charges have a significant impact on both enterprises and bank clients. They put a financial strain on people and businesses, restrict access to services, and raise costs. Regulators are essential to creating reasonable fee structures and safeguarding the interests of both consumers and businesses.

Banks must strike a balance between generating revenue and ensuring affordability and accessibility in order to lessen the effects of these changes.

The Central Bank of Nigeria (CBN), as the financial sector regulator should up its game in monitoring and supervising the financial service companies to effectively deter them from exploiting their customer and fleecing them of their hard-earned money.

The regulatory bank should also ensure that banks and other financial institutions adhere strictly to its stipulated charges and tariff regime while also encouraging them to provide value-added service to their customers to reduce the impact of cost elements in their transactions.

It’s important that the regulator sanction banks that have been found to impose unnecessary transaction charges, make frivolous deductions from their customer’s accounts, and ensure that such customers are compensated for the wrong done to them.

(omayowa@globalfinancialdigest.com; Newsroom: +234 8033 964 138)

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