By Uche K. Njoku
Back in the mid-19th Century, about 20 airplanes and 50 ships were believed to have disappeared without explanation around the triangular shaped section of the North Atlantic Ocean, off North America now known as the Bermuda Triangle.
While some theories attribute these reported occurrences to supernatural causes, other accounts are certain that those events were purely a geophysical phenomenon. This latter school of thought are of the view that the missing vessels may have been submerged by powerful waves in that area of the Atlantic Ocean which are capable of attaining heights of about 100 feet and as such would be strong enough to swallow massive objects without a trace.
Irrespective of which account one chooses to believe, it is worthy of note that aircraft and ship still continue to safely ply that section of the Atlantic Oceanto date without any incidents. This would also be the case with the market expansion strategy known as Cross-selling which businesses have continued to adopt successfully the world over, but the same concept seems to be the “Bermuda Triangle” of the Banking Industry in Nigeria as it is reputed to have swallowed not a few Banks since 2005.
Cross-selling is a marketing concept in which an Institution offers additional products and services to its already existing Customers. Banks and other Financial Institutions in the United States of America as well as other developed climes have successfully adopted this revenue generation and business expansion strategy over the years with little or no hiccups. However, Cross-selling found its way into Nigeria mostly with the 2005 Banking Industry reforms which saw a lot of Banks getting into unwholesome alliances by way of mergers and acquisitions which in turn led to cut-throat competition and unhealthy rivalry amongst the Banks.
Innovation became the order of the day as the Banks adopted every strategy in the book in order to surviveif not get ahead of their peers. Cross-selling of products and services came in handy as the Banks were encouraging their teeming Customers (who were mostly holders of the traditional Savings and Current accounts) to take advantage of various other facilities provided by the Banks.
These relationships were hastily consummated without a thorough analysis and understanding of the Customers so as to ensure that the products and services were duly tailored to their needs.
Different versions of products were therefore inflicted on these hapless Customers by the Bank “marketers” just to earn the underlying fees and meet their unrealistic targets. A large number of such transactions resulted in the “disappearance” of some of those Banks, similar to the 19th Century airplanes and ships of the Bermuda fame.
One of such Bank products is the hydra-headed “monster” known as Margin loans which saw the Banks encourage Customers to access loans just to acquire bloated Shares in blue chip Companies with promises of magical appreciation and hopes that the shares would promptly be offloaded once the profits were ripe to be plucked. While some fortunate Customers were able to reap from this Margin loans ‘magical farmland’, others were not so lucky as they were caught in the web of the 2007 – 2009 economic downturn which saw the values of those overpriced shares go belly up; and the ensuing losses completely eroding the entire investments and the promised returns.
Thus, the once-courted Customers automatically transformed into overnight Bank debtors with no veritable source of repayment as the Shares originally constituted the sole collateral for the loans. The Banks made frantic efforts to recover the loans including Litigation but the Customers readily hinged their defence on the Clauses contained in the Loan Agreements which clearly stipulated that the Banks would quickly sell off the Shares in the event that the values dropped to certain low levels so as to stem the tide of loss. Apparently, the Banks failed (or so it seems) to sell off the Shares as anticipated for reasons ranging from non-availability of ready buyers at the time, to dense ineptitude.
In the long run, some of these Banks were pulled all the way down as a result of the Cross-selling adventure. Even though some measures were promptly put in place by the Central Bank of Nigeria and the Federal Government to cushion the effects of the recklessness by the Banks so as to keep them afloat, it would seem that the Industry itself has learnt little or nothing from the mistakes of the past as unhealthy competition and particularly, unbridled Cross-selling still characterize the Banking environment in Nigeria.
The Banks still pay very little attention to the issue of Training staff in the areas of their numerous products and services; and as a result, the staff lack the requisite understanding of these products which should enable them offer specific products to specific deserving Customers.
It remains a cause for concern that the Cross-selling “Bermuda” continues to expose the Banking Industry in Nigeria to an uncertain future, while the same concept is still a sound market expansion strategy and cash cow in other economies. It is about time that the Banks in Nigeria and their Regulation put square pegs in square holes and round pegs in round holes.
Uche K. Njoku, a Lawyer, wrote in from Abuja, Nigeria.